BlackRock And Fidelity Bitcoin ETFs Outshine Grayscale’s Liquidity – JPMorgan

The GBTC has been on a free-fall following the SEC’s approval of spot Bitcoin ETF, but the outflows have reportedly slowed down four weeks after the US regulator’s approval. Meanwhile, market analysts believe that GBTC will continue to tumble against the newly issued Bitcoin ETF if it fails to address its rising fees.

Grayscale’s Fees Concerns

According to a recent JPMorgan research, the Bitcoin (BTC) exchange-traded funds (ETFs) offered by Blackrock (BLK) and Fidelity Investments have exhibited a clear superiority over Grayscale regarding liquidity metrics. Although outflows from Grayscale’s Bitcoin Trust (GBTC) slowed in the fourth week following the US Securities and Exchange Commission’s (SEC) approval of spot Bitcoin ETF, the fund is poised to face intense competition from the newly established ETFs.

According to the study, ETFs provided by Blackrock and Fidelity will likely exhibit better performance than Grayscale unless the latter significantly decreases its fees. It is worth noting that Grayscale has the highest fees among issuers of spot Bitcoin ETFs.

Notwithstanding a recent modification that reduced its management fee from 2% to 1.5% throughout its transition to a spot Bitcoin ETF, its cost remains significantly higher than rival offerings. The report stresses that Grayscale may be required to implement a more substantial fee reduction to maintain its competitiveness in the evolving ETF environment.

Furthermore, the study shows that investors prefer ETFs with sufficient liquidity metrics as market dynamics change.

Beyond The Fees

Analysts led by Nikolaos Panigirtzoglou assert that in addition to the disparity in fees, Blackrock and Fidelity’s ETFs provide better liquidity metrics than GBTC. Panigirtzoglou and co’s research analyzed the Hui-Heubel ratio, a crucial metric for determining market scope.

This ratio revealed that the market breadth of Blackrock and Fidelity ETFs is significantly greater than that of GBTC. Furthermore, the “average absolute deviation” of ETF closing prices from the net asset value (NAV) constitutes the second metric of the study. The report highlights a significant trend in this metric over the past week.

Also, the proximity of the price deviation of Fidelity and Blackrock spot Bitcoin ETFs from net asset value (NAV) to that of the GLD Gold ETF indicates a significant liquidity surge. On the other hand, the GBTC ETF continues to exhibit high deviations, suggesting a relatively lower liquidity level.

Moreover, the liquidity metrics emphasize the competitive edge that Blackrock and Fidelity ETFs possess compared to Grayscale’s GBTC.

MicroStrategy’s Weaker-Than-Expected Q4 Earnings

Meanwhile, MicroStrategy’s reported earnings for the fourth quarter, released earlier this week, fell below initial projections. However, Bitcoin investment has been at the forefront of the self-acclaimed “world’s first Bitcoin development company.”

The firm started as a software consulting firm before it converted its treasury assets (in fiat) to BTC in 2020, a move initiated by former CEO Michael Saylor. MicroStrategy remains the publicly traded firm with the largest BTC holdings at 190K BTCs, valued at over $8 billion using current market rates.

A 22% Drop In Stock Price

Nevertheless, MicroStrategy’s stock has plummeted by 22% following the debut of spot Bitcoin ETF products. The company responded to the setback by proposing investors’ active control over the firm’s capital structure, which grants them more significant sway over strategic decisions. Meanwhile, MicroStrategy has implemented reduced management expenses and increased capacity to generate cash flow.