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Bytetree Founder Believes Grayscale Should Lower Its ‘Unrealistically High’ Fee: Warns of Possible ‘Systemic Risk’

The founder of Bytetree Asset Management, Charlie Morris, has suggested the reduction of the GBTC management fee as one way Grayscale Investment can ease the current selling pressure and possibly reduce the discount on the shares. Morris says if no action is taken, “the selling pressure will build” and “could morph into a systemic risk.”
Recent GBTC Buyback Insignificant
On the other hand, Morris, who is also the chief investments officer (CIO) at Bytetree, thinks Grayscale’s recent $250 million GBTC may be too insignificant to make a difference. However, in his Bytetree Market Health Update, Morris does acknowledge that 2020 was a year of “record inflows” for Grayscale Investment. During this period, the premium on GBTC shares averaged 30% while the value of assets under management (AUM) soared to over $30 billion.

However, when the premium began to ease, the inflows into the trust similarly began to slow down. This subsequently led to the premium on the GBTC shares turning into a discount. Yet as Morris explains, this discount might still widen as the supply of GBTC shares continues to outstrip the demand for the same. In his analysis, Morris said:
The trouble is, there is nothing in place to prevent the discount from widening further. Grayscale has announced a $250m share purchase, which is great, but it is too small to make a difference within a $33 bn fund. To be taken seriously, they need to pledge to buy back that quantity each week.
Threat From Competitors
Still, as Morris notes, Grayscale Investments …
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