Grayscale tries to stay ahead of the curve in Ethereum ETF wars | Wilnesh News

For cryptocurrency company Grayscale, it’s déjà vu in the ETF market.

Tuesday, first location ether The U.S. exchange-traded fund will invest directly in Ethereum, the cryptocurrency used in the Ethereum network, allowing investors to buy the cryptocurrency the same way they buy stock and bond index funds.

Founded in 2013, Grayscale spent several years building a trust that holds more than $9 billion worth of ether. The trust has now been converted to an ETF and is one of two trusts the company will offer. Grayscale is a division of Barry Silbert’s crypto conglomerate Digital Currency Group.

As the SEC clears the way for ETFs, Grayscale will have plenty of competitors for investors to seek the lowest fees. Large financial firms, including Fidelity Investments, Franklin Templeton, black stone and Invesco have launched their own spot ether ETF on the market.

The same thing happened in January, when Bitcoin The ETF was approved, a move that caused many investors to flee Grayscale’s products for cheaper alternatives.

In its first day of trading on Tuesday, spot Ethereum ETF trading volume totaled more than $1 billion, with JPMorgan Analysts estimated net sales of $104 million.

Redemptions from the Grayscale Ethereum Trust Fund (ETHE) hit $485 million while money poured into the new product. JPMorgan attributed the outflows to investors potentially switching to cheaper alternatives or using ETF conversions to take advantage of increased liquidity relative to previous trust structures. As of press time, trading for the second day had not yet begun.

inside Bitcoin ETF In the market, Grayscale has been struggling to cope with surging competition.

Grayscale began trading shares of its Bitcoin Trust (GBTC) as a closed-end fund in 2015, which Morningstar’s Bryan Armor previously described as “a monopoly of sorts.” In the first seven months after switching from trusts to ETFs, the company saw outflows of nearly $18.7 billion, largely because its 1.5% management fee was significantly higher than its competitors, according to JPMorgan.

May, BlackRock transcend Grayscale Assets and its iShares Bitcoin ETF. The BlackRock ETF’s fee (excluding exemptions) is 0.25%.

Grayscale launches Ethereum ETHE with a 2.5% fee, which is 10 times the second-highest fee among newly listed funds. Grayscale also divested 10% of its assets to form a mini-Ether ETF designed for retail clients. this Grayscale Ethereum Mini Trust (ETH) It is a budget product with a fee of 0.15%, the lowest among new ETFs.

Others in this category range from 0.19% to 0.25%. Most issuers waive fees initially, with some offering periods as long as one year.

David LaValle, Grayscale’s global head of ETFs, told CNBC in a statement that ETHE “has been and will continue to be a trusted and efficient vehicle for investors interested in investing in Ethereum in the form of a regulated U.S. security.”

LaValle said that since going public in June 2019, its Ethereum Trust has generated annual returns of 61%, adding that the Mini Ethereum ETF “has the lowest operating expense ratio to go public.” Of its two products, Grayscale has the highest and lowest management fees.

LaValle said the “bigger picture” is that the $1 billion in trading volume on the first day “proves that many industry players are playing their part in supporting investors and the Ethereum ETP ecosystem.”

Figuring out how to navigate the new world of ETFs will be the responsibility of the ex Goldman Sachs Executive Peter Mintzberg was named CEO of Grayscale in May, just days after BlackRock surpassed Grayscale’s Bitcoin ETF in terms of assets .

During Sonnenshein’s tenure, the company operated the world’s largest Bitcoin fund, over Assets under management peaked at US$43 billion. Grayscale dominates the operating business of the cryptocurrency trust, giving it huge pricing power. It is considered by many to be the crown jewel of Silbert’s crypto empire.

In a landmark moment for the crypto industry, Sonnenshein led Grayscale to victory in a legal battle with the SEC over its application to convert GBTC into a spot Bitcoin ETF. The win paves the way for widespread acceptance of spot Bitcoin ETFs and helps solidify the cryptocurrency as a legitimate asset class.

While Sonneshein has made Grayscale’s legal path clearer, the company’s competitive advantage is murkier than ever. this Press release When he announced his resignation in May, he said he would be leaving “to pursue other interests.” His LinkedIn profile lists him as the former CEO of Grayscale and says he serves as a consultant to several companies. Sonnenshein did not respond to a request for comment.

Silbert resigned as chairman of Grayscale in December and was replaced by DCG chief financial officer Mark Shifke. Mintzberg officially took over as CEO in mid-August. Grayscale treasurer Edward McGee managed the company during this period.

In addition to Grayscale, DCG has been hit hard by the fallout from the 2022 cryptocurrency crash, with lending business Genesis ultimately filing for bankruptcy after being accused by the SEC of selling unregistered securities. In May, New York Attorney General Letitia James reached a settlement with Genesis, paying $2 billion to defrauded investors.

While Grayscale has faced challenges, the company is benefiting from the cryptocurrency market’s rebound over the past 18 months. Bitcoin has quadrupled in price since late 2022, while GBTC has performed even better, rising more than sevenfold. During this period, Ethereum has almost tripled.

DCG’s first-quarter revenue increased 51% year-over-year, and the company said it had repaid all debt and only had third-party liabilities to Genesis.

Grayscale is trying to harness new passions, written in Press release On Tuesday, “Customer demand is growing as the crypto asset class matures.”

watch: CNBC’s full interview with former Grayscale CEO Michael Sonnenshein