Crypto giant DCG posts revenue surge, Grayscale profitable despite $15 billion in outflows

Crypto conglomerate Digital Currency Group reported revenues of $229 million in the first quarter of 2024 – a year-over-year increase of more than 50% and 11% from the previous quarter. The numbers coincide with a broader resurgence in the crypto market last quarter, which saw Bitcoin jump 45% to reach a new all-time high of $74,000.

The recent rally was fueled by the Securities and Exchange Commission’s approval in January of 10 Bitcoin ETFs, which have accumulated more than $52 billion in assets under management since then, according to data from CoinGlass. DCG subsidiary Grayscale manages the largest of these, but because its ETF (known as GBTC) was created from an earlier product that offered a practical form of liquidity to shareholders, it is the only one of the new ETFs to experience a net outflow. .

“While Grayscale expected exits along with increased competition under the ETF wrapper, first quarter revenue attributable to GBTC exceeded our expectations,” DCG said in a letter to investors.

The Grayscale ETF began trading with over $29 billion in assets and remains the largest Bitcoin ETF with over $18 billion in assets under management. The redemptions were due in part to the fund’s 1.5% management fee, which is lower than the previous Grayscale product but still much higher than competitor fees, such as 0.25% for the iShares Bitcoin Trust (IBIT) of BlackRock and Fidelity’s Wise Origin Bitcoin. Fund (FBTC).

Despite the exits, DCG’s shareholder letter said the Grayscale ETF still generated $156 million in revenue. This meant no quarterly growth for Grayscale, which the DCG attributed to the redemption as well as the drop in GBTC’s sponsor fee from 2% to 1.5%.

Meanwhile, two more DCG subsidiaries, mining pool Foundry and crypto exchange Luno, reported higher profits. In the case of Foundry, revenue grew 35% quarter over quarter as a result of higher staking revenues and equipment sales, which occurred as Bitcoin miners doubled their computing power ahead of the April 19 halving event. . Luno’s revenues increased 46% to $16 million due to higher trading volumes resulting from the broader increase in market activity.

In an effort to combat fee-related redemptions, on March 12, Grayscale filed a regulatory filing for a new spot Bitcoin ETF called the Grayscale Bitcoin Mini Trust ETF (BTC) with a “materially lower fee.” If approved, a portion of GBTC shares would “seed” BTC and therefore be subject to lower fees.

The recent quarter marked something of a new era for both Grayscale and DCG, which have been consumed over the past 18 months by legal battles with the SEC over the legality of Bitcoin ETFs, which culminated in a unanimous appeals court ruling. in favor of grayscale.

“They fought the law and won,” Bloomberg ETF analyst Eric Balchunas previously told Fortune. “You have to give them credit and tip your hat.”

Learn about everything crypto related with short, easy-to-read lesson cards. Click here to Fortune’s Crypto Crash Course.

Fuente