Cryptocurrency powerhouse Grayscale, with over $50 billion in assets under management, is seeking permission from the U.S. Securities and Exchange Commission (SEC) to register a new, mini version of its Grayscale Bitcoin Trust (GBTC) exchange-traded fund (ETF), dubbed Grayscale Bitcoin Mini Trust.
Grayscale’s new Bitcoin Trust is expected to help investors escape high fees without getting taxed
According to an S-1 statement filed on March 12, the Grayscale Bitcoin Mini Trust — which would trade on the New York Stock Exchange under the ticker “BTC” — will be seeded as a “Spin-Off” of the much bigger GBTC fund. This means that an undisclosed percentage of GBTC’s underlying Bitcoin cache will be moved into the Mini Trust upon regulatory approval, and shares of the new product will be distributed to existing GBTC shareholders.
“The Spin-Off is not expected to be a taxable event for GBTC or its shareholders,” the filing indicated.
Although the percentage of the shares in the planned distribution was not disclosed, the filing notes that GBTC intends to file a 14C form with the SEC to further clarify the terms and conditions of the new offering.
Implications For Investors And The Market
Notably, Grayscale has experienced outflows from GBTC of more than $10.5 billion since the landmark greenlighting of a slew of spot BTC ETFs in mid-January. By contrast, newly launched rivals from BlackRock and Fidelity have accumulated $10.59 billion and $6.37 billion worth of Bitcoin, respectively.
Investors’ preference for other ETFs comes down to management fees. Grayscale’s GBTC ETF has stood out from the pack with its exorbitant 1.5% fees. That is significantly high compared to the 0.19% for Franklin Templeton Digital Holdings Trust (EZBC) and 0.2% at Bitwise Bitcoin ETF (BITB). The only reason to stay in GBTC is for long-term holders to avoid incurring a taxable event by offloading their shares.
Grayscale’s new Mini Trust aims to offer investors a tax-free and cost-competitive product to stem the exodus of investors from GBTC.
That being said, the introduction of BTC by Grayscale marks a considerable milestone in the crypto investment space, giving investors a cheaper alternative while retaining exposure to the fledgling Bitcoin market.
The development comes as Bitcoin ETF providers strive to entice investors into their bed of products focused on the alpha cryptocurrency. On Tuesday, VanEck slashed the sponsor fees to 0% until March 31, 2025, or until its Bitcoin Trust assets surpass $1.5 billion. The fee waiver makes it more attractive in intense competition between the shiny new BTC-based ETFs.
