Michael Sonnenshein, CEO of cryptocurrency asset manager Grayscale Investments, suggested that outflows from the Grayscale Bitcoin Trust (GBTC) may be reaching a balance after months of investor sell-offs.
Grayscale has struggled to maintain its market dominance since the U.S. Securities and Exchange Commission (SEC) approved the launch of Bitcoin ETF products from nine other applicant companies in January. Despite this, total outflows from Grayscale Bitcoin Trust (GBTC) in the last three months have exceeded $15 billion.
However, the increase in Bitcoin's value caused Grayscale's assets under management to fall to just $23.13 billion, with a lesser impact. Sonnenshein believes the fund is starting to reach a state of equilibrium, with expected outflows from bankruptcy sales and swap transactions largely behind us.
Some of this outflow was due to bankruptcy settlements of FTX and other failed crypto companies, as well as investors who sold the Grayscale ETF product immediately buying another company. Many crypto companies that filed for bankruptcy in 2022 and 2023 had shares of Grayscale's then-trust on their balance sheets, and they wanted to sell those shares when the product turned into an ETF to repay creditors.
While daily outflows are currently well below the $600 million seen in March, they are still in the red zone. On Monday, Grayscale saw an outflow of $303 million. Going forward, Sonnenshein emphasized the importance of bringing more investors into the ecosystem and continuing to innovate on the product front.
Last month, Grayscale announced it would seek approval from the SEC to convert a yet-to-be-determined portion of the ETF's assets into a new, lower-fee Bitcoin Mini Trust. Currently, Grayscale charges a 1.5% fee on its converted ETF, which is significantly higher than the average 0.25% fee charged by many of its newer competitors.
“Over time, as markets mature, we anticipate GBTC fees will decline,” Sonnenshein said. Grayscale is also hoping to gain SEC approval to convert another of its products into a spot Ethereum ETF.
Grayscale filed a lawsuit against the SEC after it rejected its spot Bitcoin ETF application in 2022. An appeals court sided with Grayscale and ordered the SEC to reconsider its decision, paving the way for BTC ETF approvals in January.
“We are optimistic that the SEC will be on the right side of history here and allow these products to come to market,” Sonnenshein said.
*This is not investment advice.