As the battle for investors’ funds intensifies among financial giants such as BlackRock, Fidelity, and others seeking approval for new bitcoin ETFs, experts suggest that Grayscale, the incumbent with a substantial lead, may be an enticing option for newcomers in the bitcoin investing space.
Grayscale, a crypto asset manager, recently obtained permission to convert its Grayscale Bitcoin Trust (GBTC) into an ETF, putting it in a favorable position. While nine other companies secured approval to launch their own bitcoin ETFs, Grayscale’s decade-long operation as a closed-end fund had already amassed nearly $30 billion in bitcoin, giving it a considerable head start over the competition.
Despite some narrowing of the gap as investors withdraw funds from GBTC and allocate them to new funds, GBTC maintains a significant lead at $22 billion, well ahead of BlackRock and Fidelity, both standing at $1.4 billion.
Industry experts suggest that Grayscale, with its established reputation, could be a target for acquisition. Brian D. Evans, CEO and founder of BDE Ventures, notes, “They are sort of the standard now, and even my dad had heard of GBTC from a long time ago, so an acquisition could happen because they have some name recognition already.”
Traditional financial players looking to rapidly expand their presence in the growing bitcoin market might find strategic value in acquiring Grayscale. Nate Geraci, president of the ETF Store, remarks, “A strategic acquisition of a firm such as Grayscale makes a ton of sense for the right traditional ETF issuer assuming the price is palatable.”
While the spot bitcoin ETF category is already fiercely competitive, recent transactions, such as CoinShares acquiring Valkyrie Investments’ ETF unit, suggest a trend of consolidation in the industry.
However, uncertainties surround Grayscale’s potential acquisition timeline due to legal issues involving its parent company, Digital Currency Group (DCG). DCG, along with its Genesis subsidiary and former partner Gemini Trust, faced a lawsuit in October from the state of New York, alleging fraud exceeding $1 billion.
James Seyffart, an analyst at Bloomberg Intelligence, points out, “Someone acquiring Grayscale is theoretically possible, possibly even likely over a long enough time frame, particularly with the current issues surrounding their parent company.”
The significant redemptions from Grayscale’s converted fund, with over $2 billion worth of GBTC sold since its ETF conversion, coupled with DCG’s legal challenges, could potentially expedite a sale. Evans from BDE Ventures suggests, “It makes you wonder about the timing of how this could play out. I suspect that were an acquisition to occur, it would likely happen sooner rather than later because you want to acquire all that bitcoin before prices go up more.