Grayscale to Spinoff a Portion of GBTC into a New Bitcoin Mini Trust

Highlights:

• Grayscale intends to spin off 10% of GBTC into the new ETF.
• BTC Mini Trust is expected to have lower fees than GBTC.
• Nate Geraci says Grayscale’s Mini Trust will soon be a leading low-fee ETF.

On July 19, crypto asset manager Grayscale announced plans to spin off 10% of the spot Bitcoin from its flagship Bitcoin fund, Grayscale Bitcoin Trust (GBTC), into a new ETF, Grayscale Bitcoin Mini Trust (BTC). The event is scheduled to take place on July 31. Grayscale said the BTC Mini Trust will begin trading on the NYSE Arca exchange, pending final regulatory approval.

Doing a thread on the situation for @Grayscale's spinoff for $ETHE & $ETH because I've gotten about a million questions on it. The mechanics will be essentially the same for $GBTC & $BTC spinoff. If you own 1,000 shares of $ETHE, you should receive 1,000 shares of mini $ETH. 1/ pic.twitter.com/Er66mj5L46

— James Seyffart (@JSeyff) July 19, 2024

Mechanics for Grayscale Bitcoin Mini Trust

A Senior Bloomberg ETF Analyst, James Seyffart, explain the mechanics of the new Grayscale product. Existing GBTC shareholders will receive Mini Trust shares proportional to their GBTC holdings. Following the spinoff, GBTC holders will hold the same amount of spot BTC but distributed across two separate funds.

Seyffart said:

“[F]rom a value point of view — say a theoretical person has $1,000 in ETHE or GBTC. After the spinoffs occur it should essentially be $900 in the original fund and $100 in the new mini ETF.” 

Fee Structures for Grayscale BTC and ETH Mini Trusts

On July 8, Grayscale announced a similar move for its Grayscale Ether Trust (ETHE) ETF. Existing ETHE shareholders will receive proportional shares in the new Grayscale Ethereum Mini Trust (ETH). The spinoff benefits current ETHE holders, as the Mini Trust’s management fees are much lower. The Mini Trust charges 0.15% in fees, while ETHE charges 2.5%. For the ETHE, the spinoff will occur on July 23.

Grayscale hasn’t disclosed the management fees for the BTC Mini Trust, but analysts expect a significant discount compared to GBTC, which charges a 1.5% annual fee. Grayscale’s GBTC and ETHE funds are among the oldest spot BTC and Ethereum funds in the U.S., launching in 2013 and 2017, respectively. The GBTC fund has over $17 billion in assets.

Grayscale Bitcoin Mini Trust Set to Become Major BTC ETF

Grayscale secured U.S. spot crypto ETF approval by winning a landmark lawsuit against the SEC last year. However, Grayscale’s GBTC faced bearish pressure due to massive outflows and a high 1.5% fee. After months of negative news, Grayscale might finally shine with the launch of its “mini” version. This low-fee spin-off could make Grayscale highly competitive against the dominant BlackRock. Nate Geraci, president of The ETF Store, says it will be interesting to see Grayscale’s inflows as Bitcoin Mini Trust will become the sixth largest and cheapest spot Bitcoin ETF.

Once this spinoff occurs, Grayscale Bitcoin Mini Trust will immediately be 6th largest spot bitcoin ETF by assets AND the cheapest at 15bps…

Also has coveted BTC ticker symbol.

Fascinated to watch flows here. https://t.co/gy5NCDGovY

— Nate Geraci (@NateGeraci) July 19, 2024

On July 19, Bitcoin ETFs marked their 11th straight day of inflows, continuing their impressive streak. On Friday, these products saw $383.6 million in inflows. Fidelity’s FBTC led with $141 million, outpacing BlackRock’s IBIT, which received $116.2 million. Grayscale’s GBTC also attracted $20.3 million.