GBTC’s Record-Breaking Outflows Streak Reaches 53

One trend about the spot bitcoin ETF derby that’s weird but makes total sense is that since converting into an ETF, the Grayscale Bitcoin Trust (GBTC) has had outflows every day.  

That’s 53 straight trading days of outflows totaling $14.7 billion.  

It’s weird because GBTC has incredible name recognition inside and even outside the crypto world. The firm behind the ETF, Grayscale, is spending millions of dollars marketing it; they’ve placed ads in subway stations and put on drone shows at ETF conferences.  

Yet the outflows make sense because GBTC is so much more expensive than competing spot bitcoin ETFs, with an expense ratio of 1.5% versus a median expense ratio of 0.25% for its 10 rivals.  

I can’t think of another time anything like this has happened. Even the SPDR Gold Trust (GLD), which is much more expensive than other gold ETFs, has plenty of days with inflows.  

The iShares Emerging Markets ETF (EEM), which is also more expensive than nearly identical alternatives, doesn’t have that many inflow days, but still has them. 

But GBTC? Nada. Maybe that’ll change. 

How GBTC Outflow Problem Can Turn Around

It’s still early days for spot bitcoin ETFs and GBTC is grappling with a confluence of unique factors that other exchange-traded funds haven’t had to address, including the ETF-conversion arbitrage trade and selling by bankrupt crypto firms.  

But it’s also unique in another way that structurally works against it. It converted into an ETF the same day on which a bunch of other competing funds launched— and many of those other funds had strong brands behind them, like iShares and Fidelity. That neutralized one of GBTC’s key advantages.  

Additionally, because those rival funds increased their assets and liquidity so quickly, it neutralized another one of GBTC’s selling points.

On Cutting GBTC Expense Ratio

It makes you wonder if GBTC will ever have a day with net inflows. The easiest way for that to happen is if Grayscale cuts the expense ratio on the fund, making it more competitive. Earlier this month, chief executive officer Michael Sonnenshein told CNBC that the firm would trim the fee, although he didn’t provide a timeframe.  

“Typically when products are earlier in their lifecycle, when they’re new to be introduced, these [fees] tend to be higher," Sonnenshein said. "As those markets mature, and as those funds grow, those fees tend to come down, and we expect the same to be true of GBTC.” 

But even if Grayscale doesn’t slash its fee, you have to think that one day, everything will align perfectly for the fund, and we’ll see a nice green bar on the flows chart.