Winklevoss prices its Zcash ETF at a tenth of Grayscale's 2.5% fee

At the 2.50% management fee crypto.news reported when Grayscale converted its Zcash Trust in August ^[7], ZCSH's roughly $751 million of net assets ^[8] earns Grayscale about $18.8 million a year ^[18]. The same assets at the 0.25% sponsor fee Decrypt reported for WINK ^[23] would earn about $1.9 million ^[25]. Matching the lower rate would cost Grayscale about $16.9 million a year at current assets ^[26].

Grayscale's withdrawals so far say little about fee competition. The negative week ended Oct. 2 ^[11], four days before Winklevoss Asset Services filed its S-1 ^[1]. Over roughly the same stretch, ZEC closed at $1,653.12 on Sep. 26 and $1,304.32 on Oct. 3, according to CoinGecko prices cited by crypto.news ^[13]. That is a fall of about 21% ^[21]. Sep. 30 and Oct. 2 alone accounted for $57.18 million, about 61% of the week's outflow ^[22].

Zcash buyers have also shown little sensitivity to fees. ZCSH still shows about $212.56 million of cumulative net inflows while charging 2.50% ^[8][7]. Its assets rose from about $304 million at the Aug. 25 launch ^[3] to $751 million. Roughly $234 million of that increase came from something other than new money, mostly the token's price ^[19]. In the week to Oct. 3 the coin moved more than nine times the 2.25-point annual fee gap between the two funds ^[27]. Decrypt puts its gain over the past year at more than 2,000% ^[17].

The stranger terms are on the sponsor's side of the filing. Gemini, the twins' exchange, would keep the coins in cold storage ^[5]. Winklevoss Capital Fund's interest, if taken up in full, would equal about 13% of ZCSH's current assets, slightly more than ZCSH lost in the week ended Oct. 2 ^[20]. Cypherpunk, the trust's governance adviser, bought a Bitmain mining fleet from Winklevoss Capital affiliates in August for $33.33 million. It said at the time that the machines ran about 18% of Zcash's network computing power ^[10].

I think the lower fee threatens Grayscale's income before it threatens Grayscale's assets. A holder who paid 2.50% through a 2,000% rally has little reason to switch over 2.25 points while the coin moves 21% in a week. The view is wrong if, once WINK lists, ZCSH loses assets in weeks when ZEC is flat or rising. A second outcome is that Grayscale cuts its fee first, keeping its holders on a smaller income. The third is that the coin itself makes the fee question moot. The Winklevoss filing flags that risk in the Orchard soundness bug, which briefly sent ZEC down about 50% this year before the Ironwood upgrade patched it ^[15].