Greyscale Maintains High Fees Due to Continued Outflows

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As the US spot bitcoin ETF continues to record net inflows weeks after its launch, some firms with higher fee offerings are seeing declines in the assets they manage.

Although some crypto fund issuers have lowered fees on their European products in response to the launch of US spot bitcoin ETFs, others in Canada and the US are keeping rates the same for now.

For example, executives at Purpose Investments, ProShares, and Grayscale Investments, have increased the value of their fund offerings in recent weeks, even as the companies' bitcoin funds have seen declines in the assets they manage.

US issuers of spot bitcoin ETFs seek to compete by offering products at lower prices. 

The existence of Grayscale Investments' Bitcoin Trust ETF (GBTC), which charges a management fee of 1.5%, contrasts with US spot bitcoin funds that have fees ranging from 0.19% to 0.30%.

According to BitMEX Research, net inflows into US spot bitcoin ETFs hit a weekly high of $1.2 billion last week, while outflows from GBTC continued to slow.

However, Canada-based Purpose Investments has seen outflows of $168 million so far this year as of Feb. 9, according to CoinShares data.

Money has flowed out of GBTC every day since the fund converted to an ETF on January 11, with outflows since that date totaling nearly $6.5 billion so far.

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Greyscale Stands by Its Stance

Dave LaValle, Grayscale's global head of ETFs, said at a panel held Tuesday at the Exchange ETF conference in Florida that the firm was "very satisfied with where we are" regarding the 1.5% annual fee.

Since its launch in 2013, GBTC has grown to $28 billion in assets before eventually being converted into an ETF. 

Today, it's worth about $23 billion — about five times the size of BlackRock's iShares Bitcoin Trust (IBIT), which is the second-largest spot bitcoin ETF.

“Cost is one consideration that clients can take into account, and if cost is a priority for them, then that is their choice,” LaValle added in the discussion. "However, there are other factors such as implicit fees, liquidity, track record, and fund size that are also very important to ETF investors."

Purpose Investments introduced the world's first ETF backed by physical bitcoin in February 2021 on the Toronto Stock Exchange. The Purpose Bitcoin ETF (BTCC) managed to surpass $740 million in assets under management in just a month after its launch, and by the end of 2023, its assets had reached more than $1.5 billion.

According to a report published last week by Trackinsight, BTCC received inflows of $480 million in 2023, although it finally experienced outflows in 2024.

Vlad Tasevski, chief operating officer and head of product at Purpose Investments, confirmed that despite recent outflows, the company has no plans to lower management fees by 1.5%.

“We are constantly reviewing the situation,” Tasevski told Blockworks. "We need to see how developments play out, but we are confident that we offer strong value and a credible track record."

Tasevski also noted BTCC's dual custody model, where BTC is held by Gemini Trust Company and Coinbase, as one of the advantages of their product. 

He also appreciates the fact that the ETF is offered in CAD and USD currency units as well as BTCC's history of supporting high trading volumes.

"Cost is only one of many factors, and at the current stage, it is not necessarily the most dominant factor," Tasevski said.

Sumit Roy stated that while the launch of US spot bitcoin ETFs does not make Canadian products obsolete, there will likely be pressure to lower their fees eventually.

"These ETFs are still attractive to Canadian investors who prefer to buy ETFs in Canada rather than those listed in the US," Roy said. "Purpose also offers a currency hedging version of a bitcoin spot fund, which helps protect Canadian investors from fluctuations in the USD-CAD exchange rate."

Mark Connors, head of research at 3iQ, revealed that the 3iQ CoinShares Bitcoin ETF (BTCQ), introduced in April 2021, is reviewing its current fee structure. 

"This process involves regular improvements in our trading processes and operations to reduce additional costs for investors, such as tracking errors," Connors said in an email. "A variety of factors, including regular engagement with our regulators and our unique custodial/sub-custodial approach, help protect our clients and reduce costs and other risks."

In terms of fund flows, one of the ETFs impacted by the presence of the US spot bitcoin ETF is the ProShares Bitcoin Strategy ETF (BITO), which has an expense ratio of 0.95%. 

Since the spot fund launched on January 11, BITO has seen outflows of $376 million, while in 2023, they received net inflows of $506 million.

Simeon Hyman, a global investment strategist at ProShares, acknowledged that the bitcoin futures market is "mature, liquid and regulated," but added that "there are many aspects we still don't know about the spot market."

Hyman also emphasized that BITO benefits from the investment company act of 1940, while the US spot bitcoin ETF is based on The Securities Act of 1933.

"It provides certain investor protections, including oversight by an independent board and asset custody requirements," he explained to Blockworks.

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