The battle for investors’ money in the newly approved bitcoin ETF market is heating up, with financial giants BlackRock, Fidelity, and others vying for dominance. However, experts suggest that these newcomers could gain a significant advantage by acquiring Grayscale, the incumbent in bitcoin investing.
Grayscale, a crypto asset manager, recently received permission to convert its Grayscale Bitcoin Trust (GBTC) into an ETF. Alongside Grayscale, nine other companies also won the ability to create their own bitcoin ETFs. Grayscale already had a substantial lead, having accumulated nearly $30 billion of bitcoin over the past decade as a closed-end fund. In contrast, the newcomers started from scratch. While the gap has narrowed as investors withdraw money from GBTC and invest in the new funds, GBTC still holds a significant lead with $22 billion in assets, compared to BlackRock and Fidelity, both at $1.4 billion.
Industry experts believe that acquiring Grayscale could be a strategic move for any traditional ETF issuer looking to catch up. Brian D. Evans, CEO and founder of BDE Ventures, stated that Grayscale has become the standard in bitcoin investing, with widespread name recognition. He suggested that an acquisition could be possible due to Grayscale’s existing reputation.
Traditional financial players have often grown their businesses through acquisitions, and the launch of ten new spot bitcoin ETFs has intensified competition between crypto and traditional finance players. Nate Geraci, president of the ETF Store, believes that a strategic acquisition of Grayscale would make sense for the right traditional ETF issuer. It would allow them to quickly boost assets under management, gain expertise in operating a crypto fund, and enhance their credibility in the crypto space.
CoinShares, another crypto asset manager, recently acquired the ETF unit of Valkyrie Investments, which has its own bitcoin ETF. Geraci predicts that more transactions like this could occur in the near future.
However, the timeline for a potential acquisition of Grayscale is uncertain due to some uncertainties surrounding the firm. James Seyffart, an analyst at Bloomberg Intelligence, pointed out that Grayscale’s parent company, Digital Currency Group (DCG), along with its Genesis subsidiary and former business partner Gemini Trust, is facing a lawsuit from the state of New York for allegedly defrauding investors of over $1 billion. Additionally, Grayscale’s recently converted fund has seen significant redemptions, with over $2 billion worth of GBTC sold since its conversion into an ETF.
Despite these challenges, Brian D. Evans believes that DCG’s legal troubles and the large amount of money being withdrawn from GBTC could expedite a sale. He suggests that an acquisition is more likely to happen sooner rather than later, as potential buyers would want to acquire bitcoin before prices rise further.
The battle for bitcoin ETF dominance is intensifying, and the possibility of Grayscale being acquired adds an intriguing twist to the competition. As the market evolves, it remains to be seen which players will emerge as the leaders in this rapidly growing sector.
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(Source: Bloomberg Intelligence)