Grayscale Investments, the issuer of one of the recently approved spot Bitcoin Exchange-Traded Funds (ETFs) in the US, saw flat revenue in the first quarter of the year following its decision to raise fees on its flagship Grayscale Bitcoin Trust ETF (GBTC). ).
Grayscale exceeds expectations despite outflow
According to to a shareholder letter from its parent company, Digital Valuta Group (DCG), the operator of the Grayscale Bitcoin Trust recorded revenues of $156 million, showing little change from the previous quarter.
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Since converting the GBTC trust to an ETF in January, Grayscale has been on the rise outflow of about $17.4 billion, as investors appear to have shifted their assets to new, cheaper funds offered by BlackRock and Fidelity, the leaders in the US ETF race in terms of inflows since January.
While GBTC charges a surcharge of 1.5% management feemany of its competitors charge less than 0.3%, leading to outflows. In answer: Grayscale announced plans to seek approval from the Securities and Exchange Commission (SEC) in March to spin off some of Grayscale’s assets into a new, lower-cost “Bitcoin Mini Trust.”
Despite the outflow, first quarter revenue attributable to GBTC exceeded Grayscale’s expectations. The company had previously expected outflows due to increased competition among the ETF wrapper. Grayscale previously charged a 2% sponsorship fee before converting the trust.
The flat sales were also attributed to higher average Bitcoin and Ethereum prices and a decline in sales assets under management (AUM).
In contrast to Grayscale’s performance, all US spot Bitcoin ETFs have witnessed total net inflows of over $11 billion to date. However, demand for these ETFs has declined recently due to tighter financial conditions in the US, where the Federal Reserve (Fed) faces the challenge of tackling persistent inflation.
DCG reports an 11% increase in turnover in the first quarter
Digital Currency Group, founded by Barry Silbert and the parent company of Grayscale reported an 11% quarter-over-quarter increase in first-quarter revenue to $229 million, mainly due to higher asset prices.
However, revenue growth lagged behind Bitcoin’s price increase, which rose more than 60% over the same period. In its letter, DCG attributed this difference to lower GBTC sponsorship fees, redemptions and stable mining revenues at its subsidiary Foundry.
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Foundry, DCG’s mining subsidiary, saw a 35% sequential increase in sales, driven by strikes and equipment sales revenue. Meanwhile, Luno is from the company crypto exchange subsidiary, witnessed a quarter-on-quarter sales increase of 46%, driven by a significant increase in trading volume.
At the time of writing, Bitcoin is trading at $62,100 and has recently experienced significant price volatility. These price fluctuations have failed to achieve a stable position above crucial price thresholds.
Featured image from Shutterstock, chart from TradingView.com