GBTC’s Assets Soar Despite Billions In Outflows

A furious bitcoin price rally has pushed assets under management in the Grayscale Bitcoin Trust (GBTC) toward their highest levels since it became an ETF in January, even as investors continued to pull hundreds of millions of dollars from the fund. 

On Thursday, GBTC’s AUM touched $26.6 billion, up from a low of $20 billion a month ago and not far from the $28.5 billion worth of bitcoin the fund held on Jan. 11, the day that spot bitcoin ETFs launched in the U.S. 

The recent spike in GBTC’s assets has occurred during a period in which the exchange-traded fund suffered relentless outflows. Investors have taken money out of the fund in every single trading session since GBTC converted into an ETF. 

While those daily outflows shrunk from a high of $640 million on Jan. 22 to as little as $22 million on Feb. 26, they spiked to $599 million on Feb. 29, the ETF’s second-largest outflow. 

The GBTC outflows contrast with the inflows of competing spot bitcoin ETFs, like the iShares Bitcoin ETF (IBIT), which became the fastest exchange-traded fund to reach $10 billion in AUM on Thursday.  

Mixed Picture for Grayscale  

For Grayscale, the numbers paint a mixed picture. On the one hand, GBTC remains a massive fund with $26.6 billion in AUM, making it the 63rd largest of all U.S.-listed ETFs. At current asset levels, and an expense ratio of 1.5%, the ETF is generating almost $400 million in annual revenue for the firm.  

To put that in perspective, IBIT would need to reach $160 billion in AUM to match those levels of revenues based on its 0.25% expense ratio. 

On the other hand, GBTC’s assets under management have only stayed stable since becoming an ETF thanks to an enormous bitcoin price surge, which has offset the $8.4 billion that investors have removed from the fund. Bitcoin has been trading comfortably above $60,000 for the past week, its highest levels since late 2021 when it set a record high near $70,000. If bitcoin’s price falls and investors continue to shun GBTC in favor of cheaper alternatives, the ETF’s AUM could tumble.  

In any case, unless Grayscale makes GBTC more competitive by drastically slashing its expense ratio, the ETF is almost certain to lose its position as the largest spot bitcoin ETF eventually.