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The Grayscale Bitcoin Trust (NYSE:GBTC) is experiencing an 11% drop today after Grayscale Investments announced the fund’s spinoff into a new exchange-traded fund (ETF).
What Happened: On July 19, Grayscale revealed its intention to spin off a portion of its GBTC into a new ETF. The record date for the spinoff is today, with BTC expected to start trading tomorrow on the New York Stock Exchange's (NYSE) Arca exchange.
The company is set to transfer 10% of the spot Bitcoin (CRYPTO: BTC) held by GBTC to its new ETF, Grayscale Bitcoin Mini Trust (BTC), on July 31.
Current GBTC shareholders will receive shares in the Mini Trust in direct proportion to the shares they hold in GBTC. This move will result in GBTC holders having the same amount of spot BTC as before but across two different funds.
James Seyffart, a senior crypto analyst at Bloomberg, explained that the spinoff will result in a value shift for investors. For example, a theoretical person with $1,000 GBTC will essentially have $900 in the original fund and $100 in the new mini ETFs.
Grayscale had previously announced a similar move with its Ethereum-based (CRYPTO: ETH) Grayscale Ethereum Trust ETF (NYSE:ETHE), with existing ETHE shareholders receiving proportional distributions of shares in its new Grayscale Ethereum Mini Trust (NYSE:ETH).
Grayscale has not disclosed the management fees for the BTC Mini Trust, but industry analysts widely expect a significant discount compared to GBTC’s current 1.5% annual management fee, according to CoinTelegraph.
See Also: Will Bitcoin Surge Past $70,000? 10x Research Highlights Key Factors To Watch
Why It Matters: The move by Grayscale to spin off a portion of its GBTC into a new ETF comes amid a predicted “real” Bitcoin bull market. Prominent crypto trader Kaleo pointed out that since the 2012 halving, Bitcoin's value has skyrocketed over 500,000% from $12 to nearly $70,000. He noted that the majority of this price discovery occurred in three distinct periods, each lasting less than two years. During the remaining time, Bitcoin’s price either moved sideways or declined.
Meanwhile, in a separate news renowned economist Justin Wolfers scoffed at pro-Bitcoin Senator Cynthia Lummis‘ (R-Wyo.) point of view that adding Bitcoin as a strategic reserve would cut down inflation and national debt. Wolfers, who is also a professor at the Ford School of Public Policy at the University of Michigan, mocked Lummis' advocacy as “one of the most amazing word salads” that he has ever read, noting a lack of logical connection between the phrases.
Price Action: At the time of writing, GBTC was trading 11.04% lower at $53.09, according to Benzinga Pro data. Meanwhile, BTC was down 4.43% in the last 24 hours, trading around $66,772.
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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
Image via Shutterstock
