I'm beginning to have second thoughts about investing in GBTC.
Grayscale never converts GBTC to an ETF, never adds a process for bitcoin redemption, and keeps its massive 2% fee. They make noises about hiring ETF expertise, looking at ETF conversion when the SEC allows it, and looking into someway for bitcoin redemption, but in the end they don't have to do any of that. The bitcoins are locked in the trust, and Grayscale can just sit and eat 2% per annum.
. No new institution will put money or bitcoin into GBTC. People would not buy GBTC on the secondary market except at steep discount. This $250 million share repurchase will probably not do anything to reduce the discount.
Author, I would say I highly doubt your premise and do not begin to understand your logic.
This statement "I suspect we will get an ETF eventually - hence the case GBTC will trade at a steep premium is effectively dead, in my opinion" seems quite backward. Why? Essentially, Grayscale has no incentive, no motivation, no reason to convert to an etf. Why would they? All 650,000 bitcoin are locked into their fund with no way out. They get paid based on a percentage, as you noted a very HIGH percentage, of the underlying bitcoin.
The ETF landscape is cutthroat, low-margin, and destined to be filled with competition. Even if they were to retain 100% of their bitcoin under management (BUM), they would only stand to get a fee of perhaps .3% (the rate NYDIG has promised), for a whopping 85% reduction in fees.
However, if they just stand pat, they will continue raking in 2% or 13,000 bitcoin per year, for doing nothing other than filing financial statements. Sure, no one will buy shares from them directly anymore, and any new Trust they set up is unlikely to gain much momentum, but who cares? They are highly unlikely to be able to build ANY alternative revenue stream that would ever begin to approach 13,000 bitcoin per year. If hitcoin hits $1,000,000 in 2025, that is $13 Billion for filing financial statements.
So, in my view, Grayscale is now an anomaly. GBTC might eventually be the largest single investment holding anywhere, but it will forever trade at a significant discount. They simply have no reason to convert. Sure, they might offer a separate ETF, hell, they could offer it for free and coast on the revenues they get from GBTC, but GBTC will forever be a trust and just sit there leaking bitcoin in fees.
FWIW, here is Michael Sonnenshein craftly saying no way we will reduce our guaranteed fee.
www.coindesk.com/...