Grayscale’s GBTC Crushes Bitcoin ETF Competition—Here’s Why

Wall Street’s shiny new Bitcoin ETFs were supposed to dethrone GBTC. Instead, Grayscale’s dinosaur fund keeps flexing—with $28 billion in assets, it’s lapping rivals like BlackRock’s IBIT. How? First-mover advantage meets ruthless fee economics.

The liquidity trap

GBTC’s 1.5% fee is highway robbery next to sub-0.3% competitors. But institutions don’t care—they’ll pay premium prices for the only ETF with critical trading volume. Dark pool operators need that liquidity like crypto bros need hopium.

The conversion play

Grayscale’s masterstroke? Converting their maligned trust into an ETF overnight, unlocking $2 billion in trapped value. Cue the hedge funds’ arbitrage bots—because nothing screams ’efficient markets’ like exploiting regulatory latency.

Now the real question: When BlackRock starts cutting fees to the bone, will GBTC’s ’liquidity moat’ hold? Or is this just another case of Wall Street’s ’temporarily embarrassed active managers’ clinging to outdated models?

Source: X

What’s behind GBTC’s dominance?

After the debut in January 2024, Grayscale’s GBTC saw the heaviest outflows on what analysts linked to investor flight to cheaper alternatives like BlackRock’s iShares BTC ETF. 

Source: Coinglass

Before the debut, GBTC held about 619,000 BTC. Sixteen months later, the GBTC’s holdings dropped to 191,000 BTC, a nearly 70% decline in assets under management (AUM). 

As shown by Geraci’s data, GBTC charged the highest fees of 1.5% while the rest of the products had an average cost of 0.15%-0.94%. Yet GBTC dominated the overall annual revenue. 

According to Bloomberg ETF analyst Eric Balchunas, GBTC’s 1.5% fee was considered average in the traditional ETF market. 

However, other analysts pointed out that most investors were captured in GBTC due to the heavy tax implications of switching to a cheaper alternative. Daniel Sempere, a business coach, stated, 

“Paying the capital gains to switch out of GBTC is more painful than paying the extra fees, I guess.” 

Simply put, the high fees and captive tax implications boosted GBTC earnings. However, can the expected approval of in-kind redemption for ETFs affect GBTC’s moat? 

According to experts, in-kind redemption, using BTC instead of cash, would lower the tax burden, especially for large investors. Despite in-kind redemption being tax-efficient, individual investors sitting on massive unrealized gains will still face capital gains tax. 

That said, GBTC ranked third on the AUM front with $17.8 billion. The BlackRock iShares BTC ETF topped the AUM list with $54.8 billion, followed by Fidelity’s FBTC at $18 billion. 

After the slump in Q1 2025, the spot BTC ETFs saw renewed demand in April, with a whopping $3 billion in inflows.

This boosted BTC’s recovery to $94k, up 26% from the year’s low of $74.5k. In the short term, the $92K range low support and $100K overhead mid-range resistance were key levels to watch. 

Source: BTC/USDT, TradingView