AUM Grayscale soared after winning in court, but faced stiff competition in ETF markets

The weeks since Grayscale's landslide victory in the SEC case have seen the company face both challenges and opportunities.

On August 27, the court ruled that the SEC must reconsider Grayscale's application to convert its GBTC fund into a spot bitcoin ETF. This happened due to the “arbitrary and capricious” decision of the commission to consider similar applications from other organizations when considering applications from this company until July 29 inclusive.

While the court's decision cannot guarantee SEC approval, it is an important step towards that goal.

Grayscale, however, may struggle to compete despite jubilation over a recent legal win. None → ← While the firm's GBTC fund charges a fee of 2%, the average fee for U.S. listed ETFs is 0.54%, which puts it at a significant disadvantage to its competitors. The global average for cryptocurrency ETPs is 1.48%. As a result of this discrepancy, some industry experts, including Bloomberg, have suggested that Grayscale will find it difficult to compete if alternative offerings have more competitive fees.

In response to these worries, Grayscale CEO Michael Sonnenschein suggested a possible fee reduction if they successfully converted the GBTC fund into an ETF. Despite this, Sonnenschein did not specify to what extent fees could be reduced. To date, the GBTC fund is raising a significant $339 million annually in aid of Grayscale and its parent Digital Currency Group.

Grayscale's popularity among investors is evident despite the relatively high fee structure. CCData reports note that GBTC Grayscale was part of an unprecedented $1.17 billion increase in its assets under management (AUM) on August 29 and 30 - the day the judges won the case until the previous day in time, but also in the evening of the same month. This significant growth brings Grayscale's total assets under management to $17.4 billion.