IBIT On Track to Take GBTC’s Spot Bitcoin ETF Crown

Only $7 billion separates the two ETFs, as the AUM gap is quickly narrowing.

sumit
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Senior ETF Analyst
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Reviewed by: etf.com Staff
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Edited by: Kent Thune

When spot bitcoin ETFs first launched in January, it seemed like the Grayscale Bitcoin Trust (GBTC) had a nearly insurmountable lead over its rivals. 

The trust, which converted into an ETF on the same day that the iShares Bitcoin Trust (IBIT) and other spot bitcoin ETFs launched, had more than a ten-year head start on its competition. 

GBTC traded on OTC markets since 2015 and was available through private placements as early as 2013.  

By the time spot bitcoin ETFs began trading on January 11, GBTC had amassed $28.5 billion in assets under management. Surely no other bitcoin ETF could come anywhere close to that anytime soon, right? 

Wrong.  

A deluge of outflows from GBTC and inflows into the rival IBIT have brought AUM in the two ETFs within sight of each other.  

Today, assets under management in GBTC stand at $22.9 billion, while assets in IBIT are $15.9 billion, a gap of only $7 billion. 

Since Jan. 11, outflows from GBTC have totaled $13.6 billion, while inflows for IBIT have been $13.3 billion. 

The near equivalency of GBTC’s outflows and IBIT’s inflows is a coincidence. Not everyone who sold GBTC since its conversion into an ETF turned around and bought IBIT (though there was probably a lot of that).  

GBTC Outflows Explained 

In its first few days as an ETF, much of GBTC’s outflows were likely the result of arbitrageurs cashing in on bets that the fund’s discount would disappear upon conversion. 

Others may have balked at the fund’s pricey 1.5% expense ratio and swapped it for competing ETFs like IBIT. 

And we know roughly $2.5 billion of GBTC’s outflows came from sales made by bankrupt crypto exchange FTX and crypto lender Genesis.  

But all of that selling should have exhausted itself early in GBTC’s life as an ETF. The fact that the fund continues to see hundreds of millions of dollars of outflows every day is astonishing. 

One explanation is that the sudden surge in the price of bitcoin—fueled by inflows into the other spot bitcoin ETFs—may be motivating GBTC holders to sell. 

In an environment in which bitcoin was flat or trending lower, GBTC investors might have been compelled to hold onto their positions, both because they expected the price to eventually rise, and to avoid paying taxes on whatever gains they may have accumulated.  

But with bitcoin spiking so dramatically, from $46,000 on the day spot bitcoin ETFs launched, to $73,000 two months later, the decision to sell GBTC became much easier. 

Investors could cash out, pay their taxes and reinvest the proceeds into cheaper spot bitcoin ETFs, and still come out ahead compared to where they were just a couple months prior. 

GBTC’s AUM Falls as IBIT's Grows

For Grayscale, the outflows from GBTC are unequivocally a negative, but the spike in bitcoin’s price has kept the ETF’s AUM from falling more than it has. 

The company can’t count on bitcoin bailing it out indefinitely, though. It’s nearly inevitable that IBIT will surpass GBTC in AUM.  

Just over the past week, $2 billion has left GBTC, while almost $1 billion has gone into IBIT. A few more weeks like that and IBIT will have the crown.  

The bigger concern for Grayscale is that the bleeding in GBTC’s assets hasn’t slowed down after more than two months on the market. 

The ETF has a one-way door—assets come out, but they’re not coming in. And as long as GBTC’s fee remains so much higher than the competition, that probably won’t change.  

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.