Grayscale CEO: Most spot Bitcoin ETFs will not survive

Grayscale’s Michael Sonnenshein backed the longevity of his firm’s spot Bitcoin ETF as it saw over $2.2 billion in outflows less a week after approval.

Holding north of $25 billion in assets under management, Grayscale’s Bitcoin Trust (GBTC) ETF is the biggest spot Bitcoin exchange-traded fund of 11 funds authorized by the United States Securities and Exchange Commission (SEC) on Jan. 10.

Grayscale also boasts the highest fees of the lot at 1.5%, but this will not deter its future success, according to CEO Michael Sonnenshein. Commenting on Bitcoin (BTC) ETF fees at the annual World Economic Forum in Davos, Sonneshein said most of the 11 may not trade on markets in the long run. 

Most of these funds from issuers, including BlackRock, Fidelity, and VanEck, charge fees between 0.2% to 0.4%. A few firms also offer zero fees for up to 12 months. The reason for this, Sonnenshein said, is because these funds are new and need to attract investors by slashing the cost.

On the other hand, Sonnenshein noted that Grayscale has been around for over 10 years with a diverse investor pool and the largest liquidity of any spot Bitcoin ETF. The crypto asset management giant believes less than five Bitcoin ETFs will survive in the long run, and even fewer may attain “critical mass”.

In the first five days since the SEC approved spot Bitcoin ETFs, GBTC has outperformed other products regarding netflows. A bulk of this volume has been outflows from Grayscale’s product. 

On-chain data providers like Arkham Intelligence have also tagged corresponding BTC deposits into Coinbase Prime accounts, likely for redemption purposes. Meanwhile, spot Bitcoin ETFs from BlackRock and Fidelity have become two of the fastest in American history to reach $1 billion in assets. 

BlackRock alone now holds over 25,000 BTC valued at about $1 billion with custodian Coinbase. The crypto exchange is navigating ongoing litigation with the SEC over securities violations.