Wilshire Phoenix Takes Aim at Grayscale With Rival BTC Trust
3 min read
Wilshire Phoenix, a New York-based financial firm, has filed a new amendment to its wShares BTC Commodity Trust (BCT) application. The initial filing was made back in June 2020 and is now expected to launch as early as October this year, assuming regulators green-light the product.
The value of BCT will track the Chicago Mercantile Exchange’s BTC price index. Fidelity Digital Assets will hold the underlying BTC as Wilshire’s custodian.
Wilshire was an early candidate for the market’s first BTC ETF before the Securities and Exchange Commission (SEC) denied the filing in 2020.
With its new BTC Trust, the firm is hoping to enjoy better luck.
“I think that our product will bring a more fair, orderly, and efficient BTC product to the publicly traded markets,” William Herrmann told Decrypt in an interview.
And as far as competition in said markets, Wilshire’s offering would go head-to-head with Grayscale’s BTC Trust (GBTC) product. Overtaking the market leader won’t be easy either.
Clash of BTC Trusts
Grayscale Investments’ suite of crypto products has dominated the industry since the first BTC Trust hit the market in 2013.
Its GBTC product lets investors gain price exposure to the leading cryptocurrency without having to deal with the headaches of personal custody. It trades on most broker platforms too, including Fidelity, Interactive Brokers, and many others.
In sum, it’s been pitched as a layperson’s alternative to start exploring the wild world of crypto. And so far, business has boomed.
At press time, Grayscale commands $25.6 billion in assets under management (AUM), excluding its 14 other crypto trusts on the market. Back in June 2020, when Wilshire first filed its BCT application, the firm had just $3.35 billion AUM for its GBTC product.
This year, however, GBTC has hit a unique dilemma: It’s lost its peg to the price of BTC. Though 1 GBTC share does not equal 1 BTC (instead it represents 0.000938892 BTC), the price of that share doesn’t match its equivalent BTC holdings.
In fact, GBTC is trading at a discount of 8.8% to the value of the underlying BTC.
Herein lies one of the key differences between Wilshire and Grayscale.
The above-mentioned premium and discounts appear due to the structure of GBTC.
GBTC shares are created each time an accredited investor sends Grayscale real BTC. But before those investors can turn around and sell their newly-minted shares on the open market, they must wait six months. For other crypto trusts, the lock-up period is as long as a year.
Wilshire’s BTC Commodity Trust avoids this. “The shares will be unrestricted on the initial issuance date – meaning that investors will be able to freely trade shares without the limitations of any lock-up period,” Herrmann said. This, plus the help of Oasis Pro Markets, the filing’s underwriter, should help mitigate the emergence of any premium or discount.
The filing does, nonetheless, list these events as risk factors for the product.
Another key difference is the cost of Wilshire’s product: 0.9% in annual fees. This is far lower than the 2% fee at Grayscale.
And as for Grayscale’s ambitions to convert its GBTC product into an ETF, Herrmann isn’t holding his breath.
“The SEC has made it quite clear that a BTC ETF is not going to be approved any time soon, so it runs the imagination of why there are so many applicants as of late,” he said. Today, there are more than a dozen ETF hopefuls, many of which have filed this year.
“I think that these institutions may have some FOMO and that never ends well. I think that we’ll see many of these applicants likely withdraw their filings soon, because it comes down to wasting time, money, and resources,” Herrmann added.
