Crypto giant DCG post surges in revenue, Grayscale profitable despite $15 billion in outflows
The crypto conglomerate Digital Currency Group posted revenues of $229 million in the first quarter of 2024—a year-over-year increase of over 50%, and 11% from the previous quarter. The figures coincide with a broader crypto market resurgence last quarter that saw Bitcoin jump 45% to hit a new all-time high of $74,000.
The recent rally has been powered by the Securities and Exchange Commission’s approval in January of 10 Bitcoin ETFs, which have amassed over $52 billion of assets under management since, according to CoinGlass data. DCG subsidiary Grayscale manages the biggest of those, but since its ETF (known as GBTC) was created from an earlier product that did offer a practical form of liquidity to shareholders, it is the only one of the new ETFs to experience a net outflow.
“While Grayscale expected outflows alongside increased competition under the ETF wrapper, Q1 revenue attributable to GBTC nevertheless 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 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 far higher than the fees of competitors, such as 0.25% for BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC).
Despite the outflows, DCG’s shareholder letter reported that the Grayscale ETF still generated $156 million of revenues. This meant no quarter-over-quarter growth for Grayscale, which DCG attributed to the redemption as well as GBTC’s sponsor fee dropping from 2% to 1.5%.
Meanwhile, two more of DCG’s subsidiaries, mining pool Foundry and crypto exchange Luno, posted higher profits. In the case of Foundry, revenue grew 35% quarter over quarter as a result of higher revenue from staking and from equipment sales, which came as Bitcoin miners doubled down on computing power ahead of the April 19 halving event. Luno’s revenues were up by 46% to $16 million, due to higher trading volumes stemming from the market’s wider surge in activity.
In an effort to combat the redemptions related to fees, on March 12, Grayscale submitted 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 the GBTC shares would “seed” BTC, and thus be subject to its lower fees.
The recent quarter marked a new era of sorts for both Grayscale and DCG, which had been consumed in 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,” Eric Balchunas, Bloomberg’s ETF analyst, previously told Fortune. “You have to give them credit and tip your hat.”
