Bitcoin
Grayscale fought hard for Bitcoin ETFs. Why it won’t bother Ethereum – DL News
- Grayscale is unlikely to sue the SEC over Ethereum ETFs like it did with Bitcoin.
- The price was an issue. Its ETF has hemorrhaged $17 billion in Bitcoin since January.
Crypto asset manager Grayscale is unlikely to go to war over Ethereum again.
Grayscale sued the Securities and Exchange Commission in 2021 in a fight to offer clients Bitcoin ETFs. The case went in their favor and paved the way for the launch of the products.
But now?
“They’re probably like, ‘To hell with it. Let someone step in this time,’” said Eric Balchunas, ETF analyst at Bloomberg Intelligence. DL News.
The company this week withdrew an archive that It would have made everything more difficult for the SEC to defend the denial of Ethereum spot ETFs in court.
“They’re just getting the ball and going home,” Balchunas said.
“And part of me doesn’t blame them. It’s not just money – it’s bandwidth, it’s attention.”
Learning with Bitcoin
The SEC spent years striking down Bitcoin spot ETF applications before Grayscale filed suit against the regulator in protest in 2022.
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The courts agreed that something was wrong.
In September, a judge concluded that the SEC acted “arbitrarily and capriciously” in denying the requests.
Thus, Grayscale was able to convert its Bitcoin fund into a spot ETF – finally giving investors the option to exit the fund if they wish. And 10 other companies, including BlackRock and Fidelity, have launched their own ETFs.
But the plan backfired on Grayscale. Its ETF has hemorrhaged more than $17 billion in Bitcoin since January, while funds from BlackRock and Fidelity have vacuumed up more than $23 billion in assets.
Balchunas said Grayscale probably didn’t expect the exits to be so violent.
“Seventy-eight days of direct departures. They broke all the records,” he said. “They didn’t realize how tough the U.S. ETF market is.”
At issue was Grayscale’s 1.5% management fee, which turned out to be multiples higher than its competitors’ 0.2% or 0.3% fees.
“They probably thought everyone would be between 0.7% and 1%, so they wouldn’t be too far from 1.5%,” Balchunas said.
Ethereum ETF
Grayscale’s Ethereum fund has nearly $9 billion in assets — which would likely disappear if the vehicle were converted into a proper ETF.
These resources are tied up, as the current structure does not allow for redemptions. Grayscale charges a solid 2.5% fee on these assets.
The other issue is that demand for an Ethereum ETF is simply not as strong as it is for the Bitcoin ETF.
Balchunas predicted that if launched, Ethereum ETFs will only receive about 10% to 15% of the assets that Bitcoin ETFs have accumulated.
“Grayscale has less to lose” by not fighting for Ethereum ETFs, Balchunas said. “Bitcoin ETFs are the main attraction.”
Ethereum ETFs “will never have the same feverish attention surrounding their approval.”
Tom Carreras is markets correspondent for DL News. Do you have any tips on Grayscale ETFs and Ethereum? Contact tcarreras@dlnews.com