Grayscale Investments, manager of the world’s largest publicly traded Bitcoin fund, said it intends to convert the $34 billion trust into an ETF when regulators allow it to, a move that could preserve its advantage in cryptocurrency investing as other firms seek to make similar moves.
“This is a subject that Grayscale has been examining closely from both a commercial and regulatory perspective for several years,” the company wrote in a Monday post.
Grayscale, a subsidiary of Digital Currency Group (ticker: DCG), was a pioneer in digital-asset management. It launched the
Grayscale Bitcoin Trust
(GBTC) in 2013 and many more crypto products, such as the Grayscale Ethereum Trust (ETHE), in the following years.
The news came as the Bitcoin Trust has been trading at a discount to its net asset value for more than 30 days, an unprecedented reversal of the pattern since the closed-end fund hit the market in September 2013.
U.S. regulators haven’t approved any Bitcoin exchange-traded funds, so the Grayscale Trust has been one of the few options for people who want exposure to Bitcoin via the stock market. High demand and limited supply meant units of the fund were bid up to more than the value of their portion of the Bitcoin held by the trust.
The recent discount on Grayscale shares suggests that investors have been selling their positions in the trust, likely in anticipation of the upcoming approval of
s. Those funds are expected to charge much less than Grayscale’s 2% management fee, which is significantly higher than most index ETFs or commodity-backed funds. It even surpasses the cost of many actively managed funds.
The company said in its Monday announcement that the management fee will be reduced if the fund converts to an ETF, but it didn’t disclose the new number.
The Grayscale Trust has other disadvantages as well, compared with a Bitcoin ETF. Investors who subscribe to new shares issued by the fund have to wait for six months before they can trade that stock on the secondary market, while investors in ETFs don’t face that kind of restriction.
The fund’s price discrepancy relative to Bitcoin–-–sometimes pretty large–-–is also undesirable for investors who want to track the digital currency’s performance without the impact of other factors. Market makers can freely create and redeem shares of ETFS, so any differences between their prices and the value of the underlying assets is immediately arbitraged away.
In any case, Grayscale may not be the only game in town for long. Investors have been eagerly waiting for a U.S.-listed Bitcoin ETF, which would allow individuals, financial advisors, and institutional investors easy access to the digital assets in the form of a security. While anyone can buy and own Bitcoins today, it remains hard for regular investors with brokerage accounts to manage…