The founder of Bytetree Asset Management, Charlie Morris, has suggested the reduction of the GBTC management fee as one way Grayscale Investment can ease the current selling pressure and possibly reduce the discount on the shares. Morris says if no action is taken, â€œthe selling pressure will buildâ€ and â€œcould morph into a systemic risk.â€
Recent GBTC Buyback Insignificant
On the other hand, Morris, who is also the chief investments officer (CIO) at Bytetree, thinks Grayscaleâ€™s recent $250 million GBTC may be too insignificant to make a difference. However, in his Bytetree Market Health Update, Morris does acknowledge that 2020 was a year of â€œrecord inflowsâ€ for Grayscale Investment. During this period, the premium on GBTC shares averaged 30% while the value of assets under management (AUM) soared to over $30 billion.
However, when the premium began to ease, the inflows into the trust similarly began to slow down. This subsequently led to the premium on the GBTC shares turning into a discount. Yet as Morris explains, this discount might still widen as the supply of GBTC shares continues to outstrip the demand for the same. In his analysis, Morris said:
Threat From Competitors
Still, as Morris notes, Grayscale Investments may not be in a position to buy-back more GBTC shares due to â€œtheir legal structure (which) prevents this.â€ Similarly, the CIO says he is â€œnot entirely sure of the benefitsâ€ of Grayscaleâ€™s plan â€œto launch an ETF that invests in GBTC in a feeder structure of sorts.â€ The CIO goes on to explain:
â€œWhen Osprey (OBTC) offers Bitcoin exposure at 0.49% per annum, you might think GBTC would drop their fees down from 2%; they are unrealistically high given the new world of competition.â€ While Morris touts ETFs as a better alternative, he, however, acknowledges that the only reason investors will/may stay in GBTC is capital gains taxes.
Meanwhile, Morris concludes his report by saying he â€œvery much hopes they (Grayscale) restore investor confidence without delay.â€
Do you agree that lowering fees will help Grayscaleâ€™s cause? You can share your views in the comments section below.
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