On July 19, crypto asset manager Grayscale announced plans to spin off a portion of its flagship Bitcoin fund, Grayscale Bitcoin Trust (GBTC), into a new exchange-traded fund (ETF).

On July 31, Grayscale will contribute 10% of the spot Bitcoin ( BTC ) held by GTBC to its new ETF, Grayscale Bitcoin Mini Trust (BTC). The company said the ETF is set to begin trading on the New York Stock Exchange’s (NYSE) Arca exchange pending final regulatory signoff.

Grayscale announces plans for Bitcoin ETF spinoff image 0 Year-to-date performance of Grayscale Bitcoin Trust (GBTC). Source: Grayscale

Current GBTC shareholders will receive shares in the Mini Trust in direct proportion to the shares they hold in GBTC. As a result of the spinoff, GBTC holders will hold the same amount of spot BTC as before, but across two different funds.

“[F]rom a value point of view -- say a theoretical person has $1,000 in ETHE or GBTC. After the spinoffs occur it should essentially be $900 in the original fund and $100 in the new mini ETFs,” Bloomberg ETF Analyst James Seyffart said in a post on the X platform.

On July 8, Grayscale announced a similar move with its Grayscale Ethereum Trust (ETHE) ETF, with existing ETHE shareholders receiving proportional distributions of shares in its new Grayscale Ethereum Mini Trust (ETH). 

The spinoff was a win for current ETHE holders because the Mini Trust’s management fees are a fraction of those charged by ETHE. The Mini Trust charges fees of 0.15% compared to 2.5% for ETHE. Fees are calculated as a percentage of the fund’s total assets under management.

Related: Fee war breaks out among spot Ether ETF issuers ahead of listings

Grayscale has not revealed the management fees for the BTC Mini Trust but industry analysts widely expect to see a similarly stark discount to those of GBTC, which currently charges investors a 1.5% annual management fee.

Grayscale’s GBTC and ETHE funds are among the longest-running spot BTC and Ethereum funds in the United States, originally launching in 2013 and 2017, respectively. The GBTC fund holds upward of $17 billion in assets.

A person familiar with the matter said the distribution would offer existing shareholders a tax-advantaged way of swapping out of the legacy fund and into the new ETF.

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