How Grayscale’s big gamble on fees is paying off with Bitcoin's rally to record high

How Grayscale’s big gamble on fees is paying off with Bitcoin's rally to record high
Grayscale, led by Michael Sonnenshein, is benefitting from a "bull market subsidy" on its Bitcoin ETF.
  • Grayscale is one of the big winners as Bitcoin reaches a new all-time high.
  • Despite massive outflows, described by one as a "bloodbath," the digital asset manager is raking in fees.

Grayscale’s gambit with high management fees is beginning to look like a shrewd piece of business as Bitcoin set a fresh record high against the dollar.

Even as the digital asset manager’s flagship product, GBTC, has experienced an exodus of $9.2 billion since converting to a spot Bitcoin exchange-traded fund, its assets under management remain largely unchanged, clocking in at $28.4 billion as of Tuesday.

“While Grayscale is losing investors it has more assets than when it launched — a phenomenon we call the bull-market subsidy,” Eric Balchunas, an ETF analyst at Bloomberg Intelligence, told DL News.

The same phenomenon occurs in other traditional financial products, like active mutual funds, he said.

Despite years of “bloodbath outflows” the funds have more “assets and revenue than ever simply because the market went up,” Balchunas said.

That’s exactly what’s at play with GBTC. Bitcoin has rallied over 50% since January and set a record high above $69,100 on Tuesday.

Ruffling feathers

Despite Grayscale’s challenges, the Bitcoin rally has enabled it to keep the value of GBTC’s assets at an even keel.

“Bitcoin’s recent price surge has essentially offset the fund’s massive outflows,” Nate Geraci, president of financial advisory firm The ETFStore, told DL News.

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Since ETF fees are calculated and accrued daily Grayscale “hasn’t lost any fee revenue if we assume a steady state in assets and the price of bitcoin moving forward,” Geraci said.

The firm’s fee approach will likely continue “ruffling some feathers,” but it looks like a “savvy business move at this early juncture,” Geraci said.

It’s possible Grayscale predicted spot Bitcoin ETF approval would “create a new wave of demand,” and push up the price of Bitcoin, Geraci said, “if so, that looks smart right now.”

Based on GBTC’s current assets under management of $28.4 billion, Grayscale’s implied annual revenue is $420 million.

Still, Grayscale faces pressure from all sides.

Nine others ETFs, including ones run by Wall Street giants like BlackRock and Fidelity, also launched on January 11.

Rivals like BlackRock and Fidelity’s fees are 125 basis points lower than Grayscale at 0.25%. The Wall Street firms’ Bitcoin ETFs have accumulated $11.5 billion and $7.5 billion in assets under management, respectively.

That means both firms would make just under $30 million each from fee revenue in 2024, if on current assets and fees, not including fee promotions.

Despite GBTC’s market share falling to 55% from 100%, it’s still leading on revenue.

Grayscale did not return a request for comment from DL News.

Adam Morgan McCarthy is a market correspondent at DL News. Got a tip? Email him at