April 10 (Reuters) - Outflows from the Grayscale Bitcoin

Trust ( GBTC ) may be reaching an equilibrium after months of

investor selling, Michael Sonnenshein, CEO of crypto asset

manager Grayscale Investments, told Reuters on the latest

episode of Inside ETFs.

Grayscale has battled to retain dominance of the bitcoin

exchange-traded fund (ETF) market since rival offerings from

nine other issuers emerged in January, after the U.S. Securities

and Exchange Commission (SEC) approved the launch of the

products after a decade-long tussle with the crypto industry.

Total outflows from Grayscale Bitcoin Trust ( GBTC ) in the

last three months topped $15 billion, according to data from

BitMEX Research, although the surge in bitcoin's value has

helped ensure that Grayscale's assets under management have

dipped only slightly to $23.13 billion.

"We do believe that the fund has started to reach a little

bit of an equilibrium where some of those anticipated outflows,

whether it was some of the bankruptcy selling, some investors

perhaps undertaking switch trades, (are) largely behind us,"

Sonnenshein said.

Some of those outflows were the result of selling connected

to the bankruptcy settlements of FTX and other defunct crypto

companies, Sonnenshein told Reuters, as well as investors

selling the Grayscale ETF only to immediately buy another.

Many crypto companies that filed for bankruptcy in 2022 and

2023 had shares of Grayscale's then-trust on their balance

sheets and looked to sell those shares once the product

converted to an ETF in order to repay creditors. That has yet to

be fully reflected in flows data.

While daily outflows currently fall well below the $600

million or so seen in March, they're still solidly in the red.

On Monday, Grayscale saw outflows of $303 million, according to

BitMEX Research.

"As we look ahead, again, it's more about bringing more

investors into the ecosystem (and) continuing to innovate on the

product front," Sonnenshein said.

Sonnenshein suggested that Grayscale may take steps to

compete with newer rival offerings from BlackRock ( BLK ),

Fidelity and others. BlackRock's ( BLK ) iShares Bitcoin Trust ( IBIT ),

which has a fee of 0.12%, has pulled in some $17.8 billion in

assets.

Last month, Grayscale said it will seek approval from the

U.S. Securities and Exchange Commission to spin off a

still-unspecified portion of the ETF's assets into a new,

lower-fee Bitcoin Mini Trust. The company has declined to

comment on what those fees would be.

Currently, Grayscale levies a 1.5% percentage fee on its

converted ETF, substantially larger than the average fee of

about 0.25% charged by most of its newer rivals, with waivers

reducing that still further.

"Over time, as markets mature, we anticipate that GBTC's

fees will come down," Sonnenshein said.

Bitcoin, the world's largest cryptocurrency, has

enjoyed a boost since the ETFs hit the market, and is up more

than 60% this year.

Grayscale also hopes to win SEC approval to convert another

of its products into a spot ether ETF. The SEC must rule on

other similar proposals by late May.

Grayscale sued the SEC after it rejected its application for

a spot bitcoin ETF in 2022. An appeals court sided with

Grayscale, ordering the SEC to reexamine its decision, which

paved the way for the bitcoin ETF approvals in January.

"We're optimistic that the SEC will be on the right side of

history here and also permit those products to come to market,"

Sonnenshein said.