World’s Second-Largest Bitcoin Fund Spawns Lower-Fee Offshoot

(Bloomberg) — A lower-fee version of the world’s second-largest bitcoin fund has begun trading in the U.S., intensifying competition for crypto investor flows.

The Grayscale Bitcoin Mini Trust listed on Wednesday with a 0.15% expense ratio — the lowest for any U.S. exchange-traded fund holding the digital asset, excluding fee waivers. The product is backed by 10% of the assets of the more than decade-old Grayscale Bitcoin Trust, which converted to an ETF in January.

The transformation came on the same day that nine new Bitcoin ETFs from companies including BlackRock Inc. and Fidelity Investments launched. It was a watershed moment for the cryptocurrency, making Bitcoin more accessible and spurring a rally in the original cryptocurrency to a record high of $73,798 in March.

New entrants have lowered fees — in some cases, temporarily dropping them to zero — to attract clients. The Grayscale Bitcoin Trust charges a 1.5% tax and has seen about $19 billion in outflows since switching to an ETF structure, according to data compiled by Bloomberg. It now ranks as the second-largest bitcoin fund behind BlackRock’s iShares Bitcoin Trust.

Existing holders of the Grayscale Bitcoin Trust will automatically have shares of the mini-fund distributed proportionally to their accounts.

“The timing is also perfect for investors,” said Zach Pandl, head of research at Grayscale. “We have a Federal Reserve that is about to cut interest rates. Crypto has become a major topic in the US presidential election. The Trump platform could support a dollar weakness that could have implications for investor portfolios.”

The group of US Bitcoin ETFs has attracted net inflows of $17.7 billion since the products were listed, part of a record-breaking start for a fund category. Outflows from the Grayscale Bitcoin Trust stood out against this backdrop.

The U.S. Securities and Exchange Commission reluctantly approved spot Bitcoin ETFs at the beginning of the year, following a court ruling in a lawsuit filed by Grayscale Investments LLC in 2023.

The asset manager launched the Grayscale Bitcoin Trust in 2013 and for years it was the largest such vehicle. It was a closed-end product that sometimes traded at significant premiums or discounts to its net asset value, prompting Grayscale to convert it into an ETF to ensure it would trade at par.

“GBTC will continue to be a very important part of the crypto space, and investors who value trading volume and tight spreads may consider this product over our new BTC product,” Pandl said.

ETFs investing in Ether, the No. 2 token by market value, also received SEC approval and began trading in July.

The story continues

The more than six-year-old Grayscale Ethereum Trust — the largest for Ether — converted from a closed-end structure to an ETF as part of the process. Grayscale also launched a low-fee Ethereum Mini Trust, which attracted net inflows of $181 million, with another $1.8 billion exiting the higher-fee portfolio.

–With assistance from Vildana Hajric and James Seyffart.

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