The largest bitcoin (BTC) asset management product is Grayscale, which runs a $19 billion BTC trust (GBTC), but its dominant position may be under threat following news that investment giant Blackrock (BLK) has filed for a spot bitcoin exchange-traded-fund (ETF) in the U.S., Bernstein said in a research report Monday.

Grayscale earns around $380 million in annualized fees “despite the product being inefficient, illiquid, and has traded at a significant discount over the last 28 months,” the broker said.

While the U.S. Securities and Exchange Commission (SEC) has approved multiple bitcoin futures ETFs, it has yet to approve a spot bitcoin ETF despite receiving numerous applications.

“If BlackRock and others manage to break through the spot ETF market, it would offer the most convenient, compliant and acceptable product for both retail and institutional players to gain bitcoin exposure,” analysts led by Gautam Chhugani wrote.

The iShares unit of fund management giant Blackrock filed paperwork earlier this month with the SEC for the formation of a spot bitcoin ETF. This prompted other asset managers including Invesco and Wisdom Tree to apply or reapply for a bitcoin ETF product.

Bernstein notes that the Grayscale Bitcoin Trust is only 3% of the total bitcoin market cap, which means there is the “headroom for a compliant ETF to grow its share as a bitcoin on-ramp solving the pain of custody.”

With the current GBTC annual fee at 2%, there is room to bring the pricing in line with more traditional asset ETF’s, the report added. Those are significantly cheaper, and tend to be less than 0.5%.

Grayscale is owned by CoinDesk’s parent company, Digital Currency Group (DCG).

ETFs Grayscale Bitcoin Trust US

Will Canny

Will Canny is an experienced market reporter with a demonstrated history of working in the financial services industry. He's now covering the crypto beat as a finance reporter at CoinDesk. He owns more than $1,000 of SOL.