Grayscale, the company behind the world’s largest Bitcoin ETF, had flat revenues in Q1 despite continuous outflows from its fund. The Grayscale Bitcoin Trust (GBTC) netted $156 million between January and March, which was similar to its Q4 2023 figure. The parent company, Digital Currency Group (DCG), reported total revenue of $229 million in the quarter, up 11% from the previous quarter. The gains were primarily driven by its mining pool giant Foundry and investment platform Luno, showing growth of 35% and 46%, respectively. Despite the expected outflows due to increased competition under the ETF wrapper, Q1 revenue attributable to GBTC exceeded expectations.
Grayscale’s competitors who launched Bitcoin ETFs with lower fees, including BlackRock and Fidelity, attracted new and prospective buyers away from GBTC. The fund saw significant outflows throughout the quarter, with its Bitcoin holdings decreasing from 619,000 BTC to 291,790 BTC. Market analysts noted that Grayscale’s investor base mainly consisted of long-term holders who sold their Bitcoin at a profit as the asset’s price increased. However, the fund experienced its first net inflow day since January 11, indicating a potential shift in investor sentiment.
Despite the outflows, Grayscale’s assets under management (AUM) suffered less due to the rising value of its existing Bitcoin holdings. The AUM fell from $30 billion to $18 billion, while BlackRock’s iShares Bitcoin Trust (IBIT) grew to control 273.25k BTC as of May 8. DCG reported a 51% yearly rise in revenue compared to Q1 2023, with Bitcoin’s price increasing by 125% since the previous year. Grayscale has applied to launch an Ether (ETH) spot ETF, but analysts are skeptical about its approval odds after the company rescinded its application for an Ether futures ETF.
The launch of Bitcoin ETFs with lower fees by competitors has impacted Grayscale’s market share, leading to significant outflows from its fund. Despite the challenges, the company managed to exceed revenue expectations in Q1 and continues to explore opportunities in the digital asset space. Grayscale’s parent company, DCG, reported a strong performance in the quarter, driven by revenue growth from its other business units. The future of Grayscale’s ETF offerings, including the potential launch of an Ether spot ETF, remains uncertain as regulatory approval continues to be a key factor in expanding its product offerings. Overall, Grayscale faces competition in the market but remains a significant player in the digital asset management space.
