Ethereum
Why a 10% drop in Grayscale’s Bitcoin ETF price on Tuesday shouldn’t faze investors
Key points to remember
- Grayscale Bitcoin Trust (GBTC) holders will see 10% of their holdings converted into the new Grayscale Bitcoin Mini Trust at the end of trading on Tuesday.
- The move largely caused the value of GBTC shares to drop more than 10% on Tuesday.
- The Grayscale Bitcoin Mini Trust has lower fees than GBTC.
- GBTC investors will receive one share of the new ETF for every GBTC share they own starting Tuesday.
Grayscale’s Bitcoin Trust (GBTC), the second-largest Bitcoin spot exchange-traded fund (ETF) by assets, lost 11% of its value Tuesday. But investors shouldn’t worry, Grayscale said.
The drop was widely expected, as 10% of the bitcoins held by the fund were sold to create the Grayscale Bitcoin Mini TrustThe further decline could be attributed to changes in the price of bitcoin, which has been trending down by around 2% in recent trading.
What’s going on with the Grayscale Bitcoin Trust?
The Grayscale Bitcoin Trust existed as a Bitcoin investment fund even before the U.S. Securities and Exchange Commission approved it. Bitcoin Spot ETF in January of this year. Once this approval was obtained, the existing Grayscale fund converted into a bitcoin spot (BTC/USD) ETF. However, it experienced massive outflows, mainly due to the comparatively higher fees it charged.
The Grayscale Bitcoin Mini Trust is a new spot Bitcoin ETF that has lower fees and offers smaller denominations than the Grayscale Bitcoin Trust.
A 10% distribution of the existing fund’s bitcoin holdings will help fund the new ETF. So what does this mean if you’re an investor in GBTC?
GBTC investors will be able to buy shares of the new ETF starting Tuesday, but if you buy GBTC after Tuesday, you won’t get any shares of the new fund. Existing holders will receive one share of the new ETF for each share held in GBTC.
Pending regulatory approval from the SEC, the Grayscale Bitcoin Mini Trust is expected to launch on NYSE Arca, under the symbol “BTC.”
Should I Care About Grayscale’s “Mini” Bitcoin ETF?
With this new product, Grayscale hopes to offer a FNB which is more competitive with other options on the market, such as BlackRock’s iShares Bitcoin Trust (I BITE), which has seen just under $20 billion in inflows since its launch in January, according to Farside Investors. Meanwhile, GBTC has seen nearly $19 billion in outflows. The iShares ETF charges a 0.25% fee, compared to GBTC’s 1.5%.
A similar situation exists with the Grayscale Ethereum Trust (ETHÉ) and the Grayscale Ethereum Mini Trust; however, a key difference is that the Grayscale Ethereum Mini Trust was available on the first day of the first ether spot (ETH/USD) The ETFs became available for trading on U.S. exchanges earlier this month.
As of the end of trading on Monday, ETHE saw about $1.7 billion in outflows, while the Grayscale Ethereum Mini Trust received $168.9 million in inflows, according to Farside Investors.