Mar. 23, 2022
Hello there, There are numerous reasons that GBTC should be converted into an ETF. I look forward to seeing GBTC be approved as a Bitcoin ETF in the coming months. 1. True investor protection The SEC is harming investors every day that they fail to implement proper protocols and instructions for a Bitcoin ETF to go live on the market. Since February 2021 (more than a year!) the GBTC shares have traded below their net asset value. Obviously, this means investors would are forced to sell their GBTC shares for a discount compared to selling the same amount of spot bitcoin on the open market. Feel free to check out YCharts to see the previous 60 days of closing market values below the NAV and adjust the chart at the top to confirm how long GBTC has been closing at a negative NAV (https://ycharts.com/companies/GBTC/discount_or_premium_to_nav). When you allow investors to sell their shares below the value they are worth, you are not protecting them! Stop the shenanigans. Start doing your job. Approve the first Bitcoin ETF and then approve the following applications as well. 2. Existing Cost Structure Prohibitive At the moment Grayscale has claimed that the existing trust structure exists because regulatory compliance for all of their products including GBTC costs the company more money in compliance than an actual ETF would. Over the past year, the premium for GBTC has been negative and Grayscale has been able to rip fees of 2% from the investors in their funds while blaming the SEC for being the reason that they can't lower the cost structure. Can you blame them? They control an asset worth $27,163,431,087 that is throwing off ~ $543,268,621 in revenue a year (as of 3/22/2022 + https://grayscale.com/products/grayscale-bitcoin-trust/). Borrowing from Ryan Selkis, CEO and founder of Messari. "A normal ETF has "authorized participants" (brokers) create and redeem baskets of shares by trading the underlying assets and the shares they represent until price per share = underlying net asset value. Grayscale is not an ETF, it's a trust that went public through Rule 144.". The existing structure does not allow investors to redeem the bitcoin that backs up each share of GBTC. Convert GBTC into a Bitcoin ETF, help return the NAV to equal the spot value of an equivalent amount of bitcoin, and lower dollar value from the fees which investors are losing each day. Grayscale gets paid their share every single business day, it's a great revenue-producing product but it is a terrible product for investors with implicit approval of the SEC. 3. Demand from investors and financial advisors In the world of Crypto mini potential investors do not want to have to worry about storing their own keys or self custody in their digital assets. investors prefer gaining exposure to an industry that has the highest CAGR (compound annual growth rate) of all investments over the last 12 years with the click of a button and the benefit of not having to remember a password or private key to enjoying an investment focused on the upside for Bitcoin. An investor who bought shares of GBTC at inception would have seen a 27,921.43% gain on their assets. When Grayscale started there were no other options, so investors were willing to take the risk to have exposure to Bitcoin in the easiest way possible for an investor in your typical taxable accounts (brokerage, Roth IRAs, IRAs, etc). Look at existing reports from crypto companies like Bitwise Investments (https://static.bitwiseinvestments.com/Research/Bitwise-ETF-Trends-2022-Benchmark-Survey.pdf?_ga=2.153292735.68697324.1647988647-600876741.1647988647). In their recent survey of financial advisors, 82% express interest in allocating clients' capital to crypto through an ETF, a proven, inexpensive, and effective path to gaining exposure to a wide variety of assets (gold, oil, etc). There are already Bitcoin ETFs that have been approved for investors on foreign stock markets that remain accessible to only the very rich or people with a Bloomberg terminal subscription (not your average person). Stop forcing people to jump through hoops to allocate a % of their portfolio to Bitcoin. Most of them will not figure out how to gain exposure to Bitcoin that has been approved in a different country. Approving a Bitcoin ETF in the United States is not reinventing the wheel. It will create more equitable access to bitcoin at a lower cost than today. Let's get on with it! Best, Charles J. Sabatier III