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Grayscale Battling Outflows And Lower-Cost ETFs, Q1 Revenue Stays Flat At $156M

Grayscale Investments, the issuer of one of the recently approved spot Bitcoin exchange-traded funds (ETFs) in the US, saw flat revenues in the first quarter of the year due to its decision to maintain fees on its flagship Grayscale Bitcoin Trust ETF (GBTC). 

Grayscale Exceeds Expectations Despite Outflows

According to a shareholder letter from its parent company, Digital Currency Group (DCG), the operator of the Grayscale Bitcoin Trust recorded $156 million in revenue, showing little change from the previous quarter.

Since the GBTC trust’s conversion to an ETF in January, Grayscale has seen outflows of about $17.4 billion as investors appear to have shifted their assets to new, lower-cost funds offered by BlackRock and Fidelity, the leaders in the US ETF race in terms of inflows recorded since January. 

While GBTC charges a 1.5% management fee, many of its competitors charge less than 0.3%, leading to outflows. In response, Grayscale announced plans in March to seek approval from the Securities and Exchange Commission (SEC) to spin off some of Grayscale’s assets into a new, lower-fee “Bitcoin Mini Trust.” 

Despite the outflows, the Q1 revenue attributable to GBTC exceeded Grayscale’s expectations. The firm had previously anticipated outflows due to increased competition under the ETF wrapper. Grayscale previously charged a 2% sponsorship fee before the trust was converted. 

The flat revenue was also attributed to higher average Bitcoin and Ethereum prices and a decrease in assets under management (AUM).

In contrast to Grayscale’s performance, all US spot Bitcoin ETFs have witnessed a total net inflow of over $11 billion thus far. However, demand for these ETFs has recently declined amidst tightening financial conditions in the US, where the Federal Reserve (Fed) faces the challenge of addressing persistent inflation.

DCG Reports 11% Q1 Revenue Increase

Digital Currency Group, founded by Barry Silbert and the parent company of Grayscale, reported an 11% quarter-over-quarter increase in Q1 revenue to $229 million, primarily due to higher asset prices. 

However, revenue growth lagged behind Bitcoin’s price appreciation, which rose more than 60% during the same period. In its letter, DCG attributed this disparity to lower GBTC sponsor fees, redemptions, and steady mining revenues at its Foundry subsidiary.

Foundry, DCG’s mining subsidiary, experienced a sequential revenue increase of 35%, propelled by staking and equipment sales revenue. Meanwhile, Luno, the company’s crypto exchange subsidiary, witnessed a 46% quarter-over-quarter sales boost, driven by a significant surge in trading volume.

Grayscale

At press time, Bitcoin is trading at $62,100 and has recently encountered significant price volatility. These price swings have failed to establish a stable position above crucial price thresholds.

Featured image from Shutterstock, chart from TradingView.com 

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US Spot Bitcoin ETFs Experience Record Outflows, Losing $740 Million In Three Days

The 10 spot Bitcoin ETFs experienced their biggest three-day outflow since their debut in January, as reported by Bloomberg. This shift in investor sentiment comes after heightened interest that propelled the largest cryptocurrency in the market to a record high of $73,700.

Bitcoin ETFs See Record Outflows

Between Monday and Wednesday, a net total of $742 million exited the Bitcoin ETFs, reflecting outflows from the Grayscale Bitcoin Trust (GBTC) and a moderation in subscriptions for similar offerings from prominent firms like BlackRock (IBIT) and Fidelity Investments (FBTC).

According to Bloomberg ETF expert Eric Balchunas, the Grayscale Bitcoin Trust has experienced a notable outflow surge. This recent development indicates a “second wind” of investor withdrawals, with a substantial $1.4 billion leaving the trust just this week. 

Bitcoin ETFs

Notably, these withdrawals have surpassed all other ETFs in year-to-date outflows and set a new record for cumulative outflows in ETF history, as shown in the chart above.

Nevertheless, GBTC continues to hold a prominent position in terms of revenue generation. It currently ranks third out of the 3,400 ETFs available, demonstrating its continued financial success.

Despite the recent outflows, the overall performance of these funds remains noteworthy, with net inflows of $11.4 billion recorded since their launch, according to data compiled by Bloomberg. This signifies one of the most successful debuts for an ETF category.

Crypto Analyst Predicts “Massive Bounce” For BTC

Bitcoin experienced a significant surge of over 5% in the United States on Wednesday, propelled by signals from the Federal Reserve (Fed) hinting at potential interest-rate cuts. 

However, the Asian market painted a different picture on Thursday, with Bitcoin losing momentum compared to continued gains in global stocks and gold. According to Bloomberg, the news of outflows from Bitcoin ETFs permeated markets, contributing to the contrasting performance.

Nonetheless, renowned crypto analyst Michael van de Poppe shared a bold prediction on social media platform X (formerly Twitter). In his post, he expressed optimism about a “massive bounce” for Bitcoin, suggesting the potential for a continuation of its upward trajectory. 

Van de Poppe also predicted that Bitcoin could consolidate in the near term before embarking on another rally towards the all-time high it reached before the halving event, which is expected to begin sometime in April.

Bitcoin ETFs

Currently, BTC is trading at $66,200, reflecting a 4% increase in the past 24 hours despite ongoing outflows in the ETF market. Over longer time frames, Bitcoin has shown consistent gains, with a 27% increase over the past thirty days and an impressive 136% gain year-to-date.

Featured image from Shutterstock, chart from TradingView.com 

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Expert Predicts Bitcoin At $750,000 As Fidelity Advises 1-3% Allocation

In a major shift within the financial industry, Fidelity Investments, with its colossal $12.6 trillion in assets under administration, is now recommending that the traditional 60/40 portfolio model should evolve to include a 1-3% allocation to crypto, specifically through its spot Bitcoin ETF (FBTC). This groundbreaking move is not just a nod to the burgeoning crypto market but a potential catalyst for unprecedented demand, potentially channeling hundreds of billions of dollars into Bitcoin.

Bitcoin allocation in 60/40 portfolio

Matt Ballensweig, Head of Go Network at BitGo, took to X (formerly Twitter) to express his anticipation, stating, “I’ve said this since the day of ETF approval – now that Pandora’s box has been opened, the multi-trillion dollar asset managers will sell BTC and crypto through their massive distribution channels for us. Fidelity now creates blueprint portfolios with 1-3% crypto.”

Echoing this sentiment, Will Clemente III, a renowned analyst, remarked on the potential ripple effects of Fidelity’s recommendation. “Fidelity now recommending a 1-3% crypto allocation in your portfolio. Gateway drug. What happens when that 1-3% becomes 3-6%? Slowly then suddenly,” Clemente noted, highlighting the potential for growth in crypto allocation.

What This Could Mean For Bitcoin Price

Adam Cochran, a partner at CEHV, further elaborated on the implications of Fidelity’s move for Bitcoin’s adoption and price trajectory. In a detailed analysis shared on X, Cochran laid out an ambitious future where the inclusion of crypto in traditional portfolios could lead to a substantial reevaluation of Bitcoin’s value. “How fucking wild is this to see. 60/40 portfolios are now 59/39/2,” Cochran began, underlining the historic milestone of crypto becoming a core asset class.

Cochran compares the adoption rates of the internet to cryptocurrency, stating, “Hell, the internet was 30 years in the making and didn’t reach 10m users till 1995. But the most non-conservative estimates put crypto ownership at 450M worldwide (conservative is more like 200M) that’s like the internet in 2001.”

He highlights the outsized economic impact of digital advancements, “Today the internet has somewhere around 5.5B users – 12x what it did in 2001. But according to BEA, the impact of the digital economy has been exponentially outsized with each year of growth.” By drawing this parallel, Cochran sets the stage for a crypto market that could see exponential growth in value and influence.

Cochran’s approach to calculating Bitcoin’s future valuation involves analyzing the potential influx of funds from traditional investments. “If that follows the change to 59/39/2, you’re looking at $1.6T in new buying… Given the current market is $2.24 trillion total marketcap… we get a cash to value rate of 9.3%.”

The core of Cochran’s analysis lies in his valuation prediction, where he states, “Prorata between coins at their current ratios and that’s $748,500 BTC and $43,635 ETH in raw spot buying. But since we know notional causes things to run, and we’ve got things like ETH’s yield demand and burn, we’re usually several multiples above the price of our raw spot demand.”

Cochran’s conclusion reflects a strong belief in the transformative potential of cryptocurrencies within traditional investment portfolios. “At the end of the day, even gold hasn’t broken into the 60/40 portfolio in a meaningful way, so I think blowing past the $12T mcap of gold by a good multiple over time is a no-brainer.”

At press time, BTC traded at $57,175.

Bitcoin price