Bernstein US regulators open to Spot Bitcoin ETF.
Bernstein, a private wealth management giant, released its latest research report on Monday, June 26th. The report suggested that Grayscale, the largest crypto asset manager in the world with a $19 billion BTC Trust (GBTC), may face competition from BlackRock following the latter’s recent filing of the spot Bitcoin ETF with the US SEC earlier this month. Bernstein noted that Grayscale’s product is inefficient and illiquid, yet still earns about $380 million in annualized fees. Grayscale has expressed its willingness to convert its GBTC product into a spot Bitcoin ETF and has even taken the US SEC to court over its refusal to approve it.
Although the US SEC has approved Bitcoin futures ETFs in the past, it has denied more than a dozen applications for spot Bitcoin ETFs due to a lack of customer protection measures. Bernstein analysts led by Gautam Chhugani wrote that “If BlackRock and others manage to break through the spot ETF market, it would offer the most convenient, compliant and acceptable product for both retail and institutional players to gain bitcoin exposure.”
BlackRock filed for the spot Bitcoin ETF with the US SEC earlier this month, which led to a flood of applications hitting the market, including from asset managers such as Invesco and Wisdom Tree. Bernstein stated that the Grayscale Bitcoin Trust (GBTC) constitutes only 3% of the total market cap of Bitcoin, leaving room for a compliant ETF to grow its share as a bitcoin on-ramp solving the pain of custody.
The report also suggests that the current annual fee for GBTC is 2%, which is considerably higher than traditional asset ETFs that are often below 0.5%, leaving room for aligning the pricing. James Seyffart of Bloomberg Intelligence made a similar argument earlier this month, noting that “if BlackRock wins approval for their ETF, which isn’t guaranteed, it may decrease Grayscale’s valuation because Grayscale would be forced to lower fees sooner than might have been assumed. On top of that, if GBTC converts to an ETF then the fund will be subject to potential outflows.”