Is Grayscale dumping billions of dollars worth of Bitcoin? Blame it on the ETFs.
Bitcoin has taken a hard hit this week, falling by over 14%, despite the historic approval of spot crypto exchange-traded funds (ETFs) just over seven days ago. And it appears that Grayscale, the digital asset manager owned by crypto behemoth Digital Currency Group, may have a lot to do with that.
Investors in Grayscale’s Bitcoin Trust (GBTC), recently converted to a Bitcoin ETF following SEC approval, have been exiting their positions in droves, and it has analysts shocked at the size of the sell-off.
Grayscale’s Bitcoin ETF started trading last week, along with 10 other similar products. Prior, the Trust had been a closed-end fund where investors could not redeem their shares for BTC. But now that it’s an ETF, investors are cashing out—big time.
Over half a billion dollars was cashed out in the first few days. In the last five days, more than $2.2 billion has left the fund, according to Bloomberg data.
All the other ETFs are seeing inflows. BlackRock’s iShares Bitcoin Trust (IBIT) is the current winner with $1.2 billion in inflows.
Senior ETF analyst at Bloomberg told Decrypt it was “kind of shocking” to see GBTC experience such big outflows.
WHEN WILL THE BLEEDING STOP? I don’t know, but this this is some serious daily outflows for The Nine to have to battle every single day.. they’ve done a great job so far but damn its a lot to ask.. pic.twitter.com/LqwPRETrQf
— Eric Balchunas (@EricBalchunas) January 19, 2024
The reason for the outflows, simply put, is down to traders exiting their positions to take gains after having previously been locked in to the fund.
GBTC also has the highest fee of any of the U.S. spot Bitcoin ETFs at 1.5%. While BlackRock’s IBIT stands at 0.12% (it will raise it to 0.25% in 12 months, though.)
This is another reason, industry observers say, that investors would want to cash out.
Investors fleeing GBTC is, in turn, leading Grayscale to shift large amounts of BTC to its custodian, American crypto exchange Coinbase, to sell—causing the price of Bitcoin to dip. On-chain data from Arkham Intelligence shows that Grayscale has sent roughly $500 million in Bitcoin to Coinbase in just the last six hours alone.
European asset manager CoinShares’ head of research, James Butterfill, said the outflows likely explain BTC’s price dip.
“Further price weakness depends on when GBTC holders stop selling,” he told Decrypt over text message, while also acknowledging that GBTC’s fees are relatively much higher than competition.
Despite the outflows, Grayscale told Decrypt that the fund was a success due to sheer trading volume.
“GBTC has been dominating trading volume, is the leading risk transfer vehicle, and has had the best performance of all spot Bitcoin ETFs since its launch,” John Hoffman, Grayscale’s managing director of sales and distribution, said.