EXPLAINER | A Look At the World’s Largest Bitcoin ETF

GBTC, which was converted to an ETF and was one of the products approved in January 2024, began in September 2013 as a private, open-ended trust for accredited investors. It represents a diversified collection of pooled investor funds with the ability to issue an unlimited number of shares.

The approval of spot Bitcoin ETFs by the SEC marked a significant milestone, introducing a more accessible and regulated avenue for both institutional and retail investors to participate in the expanding Bitcoin market.

However, before the ETFs were acceptable in the United States, the Grayscale Bitcoin Trust had provided a similar offering, enabling retail investors exposure to Bitcoin without direct purchase of the cryptocurrency.

Grayscale led the way in making Bitcoin (BTC) accessible by launching the Grayscale Bitcoin Trust (GBTC), which marked the creation of the first-ever Bitcoin fund of its kind. This enabled investors to access BTC through a familiar investment vehicle.

Establishment of GBTC

GBTC, which was converted to an ETF and was one of the products approved in January 2024, began in September 2013 as a private, open-ended trust for accredited investors. It represents a diversified collection of pooled investor funds with the ability to issue an unlimited number of shares.

In 2015, the GBTC received approval from the Financial Industry Regulatory Authority (FINRA) to trade publicly, enabling investors to purchase and sell shares under the ticker symbol GBTC. The trust passively invests exclusively in BTC, providing investors with exposure to BTC as a security without the intricacies of directly purchasing, storing, and securing Bitcoin.

GBTC shares are structured to mirror the BTC market price while offering lower fees and expenses.

Initially accessible solely as a private placement, GBTC commenced public trading on the over-the-counter (OTC) market OTCQX in 2015, adhering to the alternative reporting standard for companies not mandated to register with the United States Securities and Exchange Commission (SEC).

Modeled after popular commodity investment products such as the SPDR Gold Trust, which is a physically backed gold exchange-traded fund (ETF), GBTC expanded its offerings to include trusts for Ether (ETH), Litecoin (LTC), and other cryptocurrencies.

Other products by GrayScale, which has the longest operational history as the first publicly-traded Bitcoin fund, include:

• Grayscale Basic Attention Token Trust (GBAT)
• Grayscale Bitcoin Cash Trust (BCHG)
• Grayscale Chainlink Trust (GLNK)
• Grayscale Decentraland Trust (MANA)
• Grayscale Decentralized Finance (DeFi) Fund (DEFG)
• GDLC Grayscale Digital Large Cap Fund
• ETCG Grayscale Ethereum Classic Trust
• ETHE Grayscale Ethereum Trust
• FILG Grayscale Filecoin Trust
• HZEN Grayscale Horizen Trust
• LTCN Grayscale Litecoin Trust
• GLIV Grayscale Livepeer Trust
• Grayscale Smart Contract Platform Ex-Ethereum Fund
• GSOL Grayscale Solana Trust
• GXLM Grayscale Stellar Lumens Trust
• ZCSH Grayscale Zcash Trust

Grayscale Bitcoin Trust ETF

Bitcoin ETF Overview (Coinglass)

In 2017, Grayscale sought to convert GBTC into an ETF to enhance accessibility for retail investors. Despite multiple rejections by the SEC, citing concerns about market manipulation and investor risk, the regulatory landscape shifted in January 2024.

The SEC approved Grayscale’s application for a spot Bitcoin ETF, along with 10 others, resulting in GBTC being listed on the NYSE Arca as an ETF on January 11, 2024.

However, GBTC has experienced selling pressure over the last month. Following the approval by the U.S. Securities and Exchange Commission for Grayscale to transition GBTC into a spot Bitcoin ETF, there was a period of intense sell-the-news trading, during which investors liquidated their GBTC shares.Total BTC holdings

Despite continued outflows since the conversion of GBTC,  the fund remains the dominant product in the space and holds the most BTC (445.49K) according to Coinglass.

Its assets under management (AUM) stand at $22.75 billion, though experiencing significant negative net flows daily totaling over -$5 billion now, but still largely ahead of second-placed IShares Bitcoin Trust ETF by Blackrock at $5.68 billion AUM.