Asset management giant Grayscale submitted an S-1 form filing to the U.S. Securities and Exchange Commission (SEC) in a bid to offer Grayscale Bitcoin Mini Trust – a smaller-sized Bitcoin exchange-traded fund (ETF). If approved, the product will be listed on the New York Stock Exchange (NYSE) under the “BTC” ticker.
In addition to tax reduction, the new offering also targets outflow prevention.
In a filing dated March 12, Grayscale said that shares of the “mini” fund will be distributed to GBTC shareholders when GBTC contributes a certain amount of Bitcoin to the fund. Additionally, the fund will operate independently of the existing fund Grayscale Bitcoin Trust (GBTC).
To wit,
“This would be net-positive for existing GBTC investors, who would benefit from a lower blended fee with the same exposure to Bitcoin, spanning ownership of shares of both GBTC and BTC.”
The Crypto ETF Frenzy is Here
While Grayscale does not detail the percentage of shares allocated in the planned distribution, the firm plans to file an additional form 14C with the SEC to describe in more detail the terms and conditions of the allocation.
Issuers typically use the 14C filing to vote on upcoming corporate actions, often common in cases such as name changes or mergers. The filing is only sent to the SEC under written agreement between shareholders.
The Grayscale Mini Bitcoin Trust is set for much lower fees compared to the current GBTC. Plus, Grayscale noted in the filing that the fund is not subject to additional taxes and will receive a certain amount of Bitcoin held by GBTC. In return, existing GBTC shareholders will receive a set number of shares in the new fund.
“No consent, authorization, approval or proxy is being sought from GBTC Shareholders in connection with the Spin-Off, and GBTC Shareholders will not need to pay any consideration, exchange or surrender existing GBTC Shares or take any other action to receive Shares of the Trust on the Distribution Date,” the filing noted.
Since the debut of several spot Bitcoin ETFs on January 10, Grayscale Bitcoin Trust has received criticism for its asset management fee of 1.5%, 6-7 times higher than its competitors. The leading ETF of the pack, BlackRock’s iShares Bitcoin Trust charges only 0.3% while other prominent ones, like Ark Invest and Bitwise, have the management fee up to 0.25%.
Despite the fact that Grayscale reaffirmed that the management fee wouldn’t affect GBTC’s performance, analysts think otherwise. Moreover, cash flow into the product showing continuous declines since the first day, is also an indicator that the fee is indeed affecting the fund.
There’s a common question about why Grayscale doesn’t reduce the fee of the GBTC, instead, the company chooses to split into two separate funds. It is likely that they have a number of customers that are using GBTC and have contracts. These customers accept higher fees rather than canceling the contract, so they will continue to charge high fees for these customers.
There Will Be More ETFs
As of March 1, the total cumulative net amount of Bitcoin ETF products recorded since the launch date topped $10 billion, BitMEX Research reported. The majority belongs to BlackRock’s iShares Bitcoin Trust (IBIT) fund with almost $563 million, alongside other funds. In contrast, Grayscale’s GBTC witnessed a massive outflow of around $494 million.
Yesterday, VanEck announced that its spot Bitcoin ETF (HODL) will waive management fees until March 31, 2025. The move immediately attracted around $118 million flowing into the fund and again suggested that ETF investors are caring about fees.
Bitcoin’s rise has been steady since the approval of the first Bitcoin ETF in January 2024. Earlier this week, it surpassed the Swiss Franc to become the world’s 13th largest currency. Bitcoin also eclipsed silver to become the 8th largest asset in market cap.
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