BlackRock's IBIT, Fidelity's FBTC Have a Liquidity Edge Over Grayscale's GBTC: JPMorgan

Outflows from GBTC slowed during the fourth week following SEC approval.
Still, GBTC is likely to lose more funds to newly created spot bitcoin ETFs if it doesn't cut its fees.
The BlackRock and Fidelity ETFs also have an advantage over Grayscale when it comes to certain liquidity metrics linked to market breadth.

There is evidence the BlackRock (BLK) and Fidelity spot bitcoin (BTC) exchange-traded funds (ETFs) already have an advantage over Grayscale when it comes to certain liquidity metrics linked to market breadth, JPMorgan (JPM) said in a research report Wednesday.

Even though outflows from Grayscale's GBTC slowed in the fourth week following approval by the U.S. Securities and Exchange Commission, the fund is expected to lose out to the newly created ETFs, and in particular to the BlackRock and Fidelity products, if it doesn't make a meaningful cut to its fees, the report said.

Grayscale charges the most among spot bitcoin ETF issuers. It dropped its 2% management fee to 1.5% as part of its conversion to a spot bitcoin ETF, but is still much more expensive than rival offerings.

"An additional reason beyond fees is that the BlackRock and Fidelity ETFs are already commanding an advantage vs GBTC in terms of two liquidity metrics," analysts led by Nikolaos Panigirtzoglou wrote.

The first is the bank's proxy for market breadth based on the Hui-Heubel ratio. The value for GBTC is about four times higher than those of BlackRock and Fidelity ETFs, implying they "exhibit significantly more market breadth than GBTC."

The second metric is based on the "average absolute deviation" of ETF closing prices from net asset value (NAV), the report said.

In the last week this metric showed the "ETF price deviation from NAV of the Fidelity and BlackRock spot bitcoin ETFs approached that of the GLD Gold ETF, implying a significant improvement in liquidity, while the deviations for the GBTC ETF have remained high implying lower liquidity," the report added.

Grayscale disagreed with the report's conclusion. "If we examine dollar volume traded – the most widely used metric for tracking ETF liquidity – it is clear that GBTC has been the liquidity market leader since it launched as a spot bitcoin ETF," said Louis Hsu, Grayscale's vice president of ETFs.

UPDATE (Feb. 8, 2023, 15:01 UTC): Adds a statement from Grayscale.

Edited by Sheldon Reback.

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BlackRock, Fidelity Bitcoin ETFs Have a Liquidity Edge Over Grayscale: JPMorgan

GBTC is expected to lose further funds to newly created ETFs unless there is a meaningful cut to its fees, the report said.

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