Grayscale Investments, the issuer of one of the recently approved spot Bitcoin exchange-traded funds (ETFs) in the US, saw flat revenues in the first quarter of the year due to its decision to maintain fees on its flagship Grayscale Bitcoin Trust ETF (GBTC). 

Grayscale Exceeds Expectations Despite Outflows

According to a shareholder letter from its parent company, Digital Currency Group (DCG), the operator of the Grayscale Bitcoin Trust recorded $156 million in revenue, showing little change from the previous quarter.

Since the GBTC trust’s conversion to an ETF in January, Grayscale has seen outflows of about $17.4 billion as investors appear to have shifted their assets to new, lower-cost funds offered by BlackRock and Fidelity, the leaders in the US ETF race in terms of inflows recorded since January. 

While GBTC charges a 1.5% management fee, many of its competitors charge less than 0.3%, leading to outflows. In response, Grayscale announced plans in March to seek approval from the Securities and Exchange Commission (SEC) to spin off some of Grayscale’s assets into a new, lower-fee “Bitcoin Mini Trust.” 

Despite the outflows, the Q1 revenue attributable to GBTC exceeded Grayscale’s expectations. The firm had previously anticipated outflows due to increased competition under the ETF wrapper. Grayscale previously charged a 2% sponsorship fee before the trust was converted. 

The flat revenue was also attributed to higher average Bitcoin and Ethereum prices and a decrease in assets under management (AUM).

In contrast to Grayscale’s performance, all US spot Bitcoin ETFs have witnessed a total net inflow of over $11 billion thus far. However, demand for these ETFs has recently declined amidst tightening financial conditions in the US, where the Federal Reserve (Fed) faces the challenge of addressing persistent inflation.

DCG Reports 11% Q1 Revenue Increase

Digital Currency Group, founded by Barry Silbert and the parent company of Grayscale, reported an 11% quarter-over-quarter increase in Q1 revenue to $229 million, primarily due to higher asset prices. 

However, revenue growth lagged behind Bitcoin’s price appreciation, which rose more than 60% during the same period. In its letter, DCG attributed this disparity to lower GBTC sponsor fees, redemptions, and steady mining revenues at its Foundry subsidiary.

Foundry, DCG’s mining subsidiary, experienced a sequential revenue increase of 35%, propelled by staking and equipment sales revenue. Meanwhile, Luno, the company’s crypto exchange subsidiary, witnessed a 46% quarter-over-quarter sales boost, driven by a significant surge in trading volume.

At press time, Bitcoin is trading at $62,100 and has recently encountered significant price volatility. These price swings have failed to establish a stable position above crucial price thresholds.

Featured image from Shutterstock, chart from TradingView.com 

Despite the US dollar dominance sweeping the financial space, the apprehensions surrounding the US economy are compelling nations to take staggering steps. 

A new development has been noted where Middle Eastern and African countries have been consistently withdrawing their gold reserves from the US, adding more pressure to the USD’s global prestige. 

Also Read: This State’s Billionaire Confirms the US Dollar Collapse 

Why Are Countries Withdrawing Gold Reserves From The US?

Several Middle Eastern and African countries, reportedly Nigeria, South Africa, Ghana, Senegal, Cameroon, Algeria, Egypt, and Saudi Arabia, have decided to withdraw their gold reserves from the US. 

The move is triggered by the instability encountered in the US financial system, further compounded by eroding USD dynamics. 

“These countries aim to insulate themselves from potential financial contagion and secure their wealth within their borders.”

According to several analysts and commentators, countries isolating their holdings from centralized financial hubs like the US portray a stark distinction that the world is slowly inching towards. This implies that nations are interested in exploring alternatives rather than sticking to just one notion.

“Furthermore, this wave of withdrawals underscores a broader trend of geopolitical realignment as nations reassess their financial dependencies. They are doing so to fortify their economic sovereignty. The move is not merely symbolic. It reflects a pragmatic shift in global financial strategy. The countries are now opting to diversify their holdings and mitigate exposure to potential risks emanating from centralized financial hubs.” As shared by Clint Engler, CEO of CERAC Trader Strategy, 

The US dollar is currently sitting in a precarious position, with mounting debt metrics gnawing at it. Similarly, the comments of US Chief Economic Advisor Jared Bernstein have further added fuel to the fire, adding to the growing USD woes. 

Challenges That the USD Has to Face

With the BRICS alliance exploring options to launch a new currency, the US dollar now has fierce competitors to tackle to keep its prestige intact. 

Also Read: Chinese Yuan Threatens To Uproot the US Dollar

Similarly, with Russia and China echoing calls for de-dollarization, the USD is now standing at the edge, dipping sideways.

“Meanwhile, BRICS has led a growing rally around precious metals. Primarily gold as BRICS is looking to use gold to back its underdeveloped currency. It will use it as an alternative to the US Dollar.”