Grayscale Investments has filed for a new Bitcoin mini fund to counter the $11 billion outflows from its spot Bitcoin ETF, which has been attributed to high fees. The new fund is seen as a way to retain investors by offering exposure to Bitcoin at a lower cost, potentially offsetting the impact of the high fees of its existing spot Bitcoin ETF. Analysts believe the move is a response to the exodus of investors and could help Grayscale retain its higher fees while incentivizing investors to stay.
Grayscale Investments research head Zach Pandl stated that there is not enough bitcoin to meet the increasing demand, leading to higher prices, as US-listed bitcoin exchange-traded funds have been purchasing an average of 3,500-4,300 coins daily, while only 900 coins are created each day by the bitcoin network. The upcoming "halving" event, which will reduce the daily supply of new coins to 450, may exacerbate the supply issues.
Grayscale Investments identifies key factors driving Bitcoin's price increase in 2024, including inflows into Bitcoin ETFs, resurgence of on-chain activity, and the incentivization of miners ahead of the 2024 Bitcoin halving. Factors such as demand shock from institutions buying Bitcoin for ETFs, increase in on-chain activity, and the reduction of BTC released per mined block due to the halving are expected to contribute to Bitcoin's surge. Additionally, the innovation of Bitcoin Ordinals and its impact on miner revenue and on-chain activity are seen as further strengthening Bitcoin's market position.
The SEC has delayed decisions on Grayscale Investments' application to convert its Ethereum trust product into an ETF, as well as BlackRock's similar application, following the recent approval of spot bitcoin ETFs. The agency is seeking public input on whether arguments for a spot bitcoin ETF also apply to a spot ethereum ETF, and is asking about concerns related to Ethereum's ecosystem and susceptibility to fraud and manipulation.
Grayscale Investments, with over $27 billion in assets under management, is poised to dominate the spot bitcoin ETF market if approved by the SEC, thanks to its massive volume and liquidity. Despite proposing higher fees than the competition, Grayscale's existing investor base and tax considerations may give it an edge. However, potential outflows and legal issues surrounding its owner, Digital Currency Group, could pose challenges. Nonetheless, Grayscale's significant head start in AUM and daily volume could make it difficult for other ETF issuers to compete, although the SEC could still potentially intervene.
BlackRock, the world's largest fund manager, met with the U.S. Securities and Exchange Commission (SEC) to discuss its spot Bitcoin exchange-traded fund (ETF) application. The meeting focused on the mechanics of the investment vehicle and whether an "in-kind redemption model" or "in-cash" model would be best for investors. Grayscale Investments also met with the SEC regarding its bid to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF. BlackRock's application for the iShares Bitcoin Trust has sparked optimism among ETF analysts, who predict the long-awaited crypto investment vehicle could hit the market by January. A spot Bitcoin ETF would simplify Bitcoin investment for ordinary investors by allowing them to buy shares that track the cryptocurrency's price.
The price of bitcoin surged to $37,000, reaching its highest level since May 2022, as expectations of a bitcoin exchange traded fund (ETF) approval by U.S. regulators continued. The U.S. Securities and Exchange Commission (SEC) opened talks with Grayscale Investments regarding its application to convert its bitcoin trust product into a spot bitcoin ETF. A brief window for the SEC to potentially approve all 12 current spot bitcoin ETF applications opened, with a 90% chance of approval by January 10, according to Bloomberg. Additionally, about $86.8 million in bitcoin short positions were liquidated, and cryptocurrency-related stocks, such as Coinbase and Marathon Digital, saw significant gains.
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler did not provide any details on the agency's plans for spot bitcoin exchange-traded funds (ETFs) after the court ordered the SEC to withdraw its objection to Grayscale Investments' application. Gensler stated that he would let the situation play out and wait for recommendations from SEC staff before making any judgments. The outcome of the court order will impact not only Grayscale but also other major financial firms awaiting the SEC's approach to pending applications for spot ETFs. Gensler also declined to comment on other ongoing court cases involving crypto firms, emphasizing that he would let the cases proceed through the legal process.
Grayscale Investments has launched Grayscale Crypto Sectors, a framework that organizes the crypto asset class into five distinct sectors, and announced a partnership with FTSE Russell to introduce the FTSE Grayscale Crypto Sector Index Series. The indices will track and evaluate the rapidly evolving crypto ecosystem, providing investors with tools to understand and analyze the market. The five Crypto Sector Indices cover currencies, smart contract platforms, financials, consumer & culture, and utilities & services. The indices will be reassessed quarterly to reflect the dynamic nature of the crypto asset class.
Bitcoin surged 10% to reach 1-1/2 year highs, driving up the prices of crypto-related stocks, as speculation about the possibility of a bitcoin exchange-traded fund (ETF) grew. Reports suggest that the U.S. Securities and Exchange Commission (SEC) won't appeal a ruling that it was wrong to reject an application from Grayscale Investments, fueling anticipation of a spot bitcoin ETF. Several major financial institutions, including BlackRock, VanEck, and Fidelity, have pending bitcoin ETF applications. The market is optimistic that a physical BTC ETF will be approved in the next three months, if not sooner.
Grayscale Investments has argued that the U.S. Securities and Exchange Commission (SEC) has "no grounds" to reject the conversion of its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF). The SEC was ordered by the D.C. Circuit Court of Appeals to review its previous rejection of the conversion, with Grayscale stating that its proposed product is not materially different from bitcoin futures exchange-traded products (ETPs) already trading in the U.S. Grayscale's legal team wrote a letter to the SEC, urging them to treat the Trust similarly to ETPs that invest in bitcoin futures contracts. However, the recent court decision only requires the SEC to review the rejection, not to approve it.
Industry experts believe that if a spot bitcoin ETF is approved by the SEC, it could be one of the largest launches in history. The introduction of spot bitcoin products could lead to a reallocation of billions of dollars from existing bitcoin investment products such as Grayscale Investments' Bitcoin Trust (GBTC) and Canadian bitcoin ETFs. A physically backed ETF that closely tracks the bitcoin price and provides bankruptcy protection for the fund issuer is expected to generate significant demand, especially if launched by a major asset management firm like BlackRock. The approval of a spot bitcoin ETF could also trigger a reshuffling of assets and potentially attract institutional investors and financial advisers who have been waiting for a reputable player to enter the market.
