Displaying items by tag: bitcoin

Grayscale has been a pioneer in terms of bringing crypto investments to a wider group of investors with the launch of Grayscale Bitcoin Trust (GBTC) in 2016. For some time, it was the primary vehicle to get exposure to the asset through traditional means. However, the SEC’s approval of bitcoin ETFs means that the landscape is more competitive, with offerings from leading asset managers at lower costs. 

Now, Grayscale is launching a spinoff version of GBTC, which will have a much lower fee of 0.15% vs. 1.5% for GBTC. The new ETF, Grayscale Bitcoin Mini Trust (BTC), will have the lowest fee among all spot bitcoin ETFs. At launch, about 10% of GBTC’s assets will be moved to BTC, which means GBTC shareholders can convert holdings into BTC without having to pay capital gains taxes. 

With the launch of several spot bitcoin ETFs, there were net outflows from GBTC despite bitcoin’s impressive gains over the past few months. Previously, gains in bitcoin would coincide with a surge in inflows into GBTC. 

The success of new bitcoin ETFs from Blackrock, Fidelity, Bitwise, and Ark also shows that there is strong demand for low-cost ETFs in the crypto space. In contrast, GBTC was structured more like a mutual fund. 

Finsum: Grayscale is launching a spinoff version of its Grayscale Bitcoin Trust (GBTC), which will come with significantly lower costs as the asset manager looks to compete with the launch of several bitcoin ETFs.

According to Bloomberg senior ETF analyst Eric Balchunas, there is only a 25% chance that the SEC approves a spot ethereum ETF. He points to the lack of SEC engagement on the topic and the absence of any positive signs or chatter on the subject, which is a departure from the lead-up to bitcoin’s approval. Balchunas believes this lack of engagement is ‘tactical’ rather than ‘procrastination’. 

The crux of the issue is how ethereum should be classified. There are indications that the SEC is leaning towards treating it like a security based on subpoenas to crypto companies that have interacted with the Ethereum Foundation. 

However, there are some dissenting voices who are more optimistic about approval. Craig Salm, Grayscale’s Chief Legal Officer, says the SEC’s reticence is due to most issues already being cleared up during the bitcoin ETF approval process. He believes both ETFs are nearly identical, except for the underlying asset. He also pointed to the approval of an ethereum futures ETF and its classification as a commodity future as a favorable sign. 

Currently, several asset managers have filed for approval for an ethereum ETF, including Blackrock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, Franklin Templeton, and Hashdex. The most immediate deadline is May 23 for VanEck.

Finsum: Over the next couple of months, the SEC will decide on an ethereum ETF. Reading the tea leaves, Bloomberg’s Eric Balchunas is not optimistic that it will be approved. 

Robert Mitchnick, Blackrock’s digital asset lead, believes that bitcoin is more like ‘digital gold’ rather than a ‘risk-on’ asset, despite its strong correlation to equities in recent years. Throughout bitcoin’s existence, there has been a constant debate about its true nature. Some argue that bitcoin is like gold given that there is a fixed supply, which means that it should provide protection against inflation. 

While this may be true in theory, in reality, bitcoin has largely moved in the same direction as equities, which undermines the argument that it offers diversification. In 2022, bitcoin tumbled as the world dealt with the highest levels of inflation in decades. Notably, equities were also down 25% in 2022. In the following year, as equity markets made new highs, bitcoin also followed and made new highs as well. 

Despite this relationship, Mitchnik believes that historically, bitcoin has demonstrated very little correlation to stocks. He attributes the recent rally to excitement around the launch of bitcoin ETFs in the US. In terms of allocation, he recommends between 1 and 3% for investors to provide diversification and differentiated returns. The argument about bitcoin’s nature is germane for investors who want to understand whether it will make their portfolio more risky or more diversified. 

Finsum: There are two camps when it comes to bitcoin. One sees bitcoin as an asset that is closely correlated to equities; while the other believes that bitcoin is more like gold and can help diversify portfolios.

On January 10, the SEC approved 11 spot bitcoin ETFs. Vanguard quickly made the decision to not offer a bitcoin ETF. The decision has been met with resistance from customers. Recently, CEO Tim Buckley provided more insight into this decision, given that this has been a constant source of inquiry.

Overall, the firm doesn’t believe that bitcoin is a suitable investment option for a retirement plan, given the asset’s volatility and speculative nature. Buckley also rejects the notion that bitcoin is a 'store of value’, pointing to its severe declines in the past and correlation with equities. For example, bitcoin dropped from $69,000 to $16,000 between 2021 and 2022, while the S&P 500 was down 21% during this period from peak to trough.

Buckley added that he doesn’t believe that Vanguard will offer a bitcoin ETF until something significantly shifts in the asset class. In contrast, Vanguard only invests in asset classes with underlying cash flow. With equities, this refers to the future earnings of a company. For bonds, it can be calculated through a bond’s coupon and principal. Since bitcoin has failed to function as an effective ‘store of value’ and generates no cash flow at the moment, it remains purely a speculative asset, which makes it inconsistent with Vanguard’s principles and ethos. 

Finsum: Vanguard is not offering a bitcoin ETF, unlike many of its major competitors. CEO Tim Buckley shared why bitcoin is more of a speculative asset and unfit for long-term investing. 

Many have speculated that one of the catalysts for the rally in bitcoin is due to precious metals investors shifting allocations. Both assets offer protection against inflation and appeal to investors concerned about long-term monetary and economic instability. Gold and bitcoin have also enjoyed strong performances in recent months and are trading at or close to all-time highs.

However, this conjecture is not correct, according to JPMorgan. It doesn’t see outflows from gold ETFs into bitcoin ETFs. Instead, the bank notes that institutional investors, retail investors, and hedge funds have been buyers of futures of both assets since February. Since February, about $7 billion of bitcoin and $30 billion of gold futures have been bought. It also notes that both assets are extended over a short-term timeframe, leading to the risk of a pullback.

JPMorgan also believes that MicroStrategy’s recent purchase of $1 billion in bitcoin in 2024, in addition to its $1 billion purchase in Q4 of last year, has also contributed to upward pressure for bitcoin. According to the bank, this does lead to more risk in crypto as “bitcoin purchases by MicroStrategy add leverage and froth to the current crypto rally and raise the risk of more severe deleveraging in a potential downturn in the future.”

Finsum: Many believe that one of the catalysts for the rally in bitcoin is that precious metals investors are shifting allocations. However, this is not correct, according to JPMorgan.