By
Mayowa Adebajo
May 20th, 2024
GBTC’s high management fees at 1.5% continue to hurt Grayscale as revenue of the firm remained flat in Q1 amid high redemptions from Bitcoin ETF.
On Thursday, May 9, Grayscale Investments reported its first-quarter earnings which took a hit amid strong outflows from its Grayscale Bitcoin ETF GBTC. While most crypto companies reported strong Q1 2024 numbers, the Grayscale revenue numbers stood flat as the company refused to divert from the high management fees charged by GBTC.
As per the shareholder letter from the parent firm Digital Currency Group, the operator of Grayscale Bitcoin Trust clocked $156 million in Q1 revenue. Ever since the ETF approval by the US SEC, Grayscale has seen net outflows of $17.5 billion. Amid its high management fees, a large number of investors have moved their holdings from GBTC to other low-cost Bitcoin ETF issuers such as BlackRock and Fidelity.
As we know, GBTC has been charging a management fee of 1.5%, while most of the other peers charge as little as 0.3%. Before the trust was converted, the firm imposed a 2% sponsorship fee. Grayscale also attributed the flat revenue to the higher average prices of Bitcoin and Ether, alongside the reduced assets under management. In its letter to shareholders, Digital Currency Group noted:
“While Grayscale expected outflows alongside increased competition under the ETF wrapper, Q1 revenue attributable to GBTC nevertheless exceeded our expectations.”
Since the start of trading in January 2024, all of the US spot Bitcoin ETFs have registered total net inflows of over $11 billion. However, amid the tightening financial condition in the US, the demand for Bitcoin funds has slowed down considerably. On the other hand, the outflows from the Grayscale Bitcoin ETF GBTC have continued. On Thursday, May 9, GBTC reported over $44 million in net outflows.
Digital Currency Group Reports 11% Surge in Revenue
Gryascale’s parent firm Digital Currency Group (DCG) reported an 11% surge in Q1 2024 revenue jumping to $229 million. The shareholder letter stated that this comes mostly on the backdrop of higher asset prices.
Despite Bitcoin price surging over 60% during the period, revenue growth trailed behind. DCG’s letter attributed this to “lower GBTC sponsor fees and redemptions, and stable mining revenues at Foundry.”
The letter also highlighted a 35% sequential increase in revenue at DCG’s mining subsidiary, Foundry, propelled by staking and equipment sales revenue. Additionally, sales at its Luno subsidiary, a crypto exchange, surged 46% quarter-over-quarter, buoyed by a rise in trading volume.