Grayscale’s Bitcoin Trust (GBTC)
Amid a crypto market downturn, Grayscale’s Bitcoin Trust (GBTC) is experiencing significant outflows totaling $594 million. In response, Grayscale transferred 9,840 BTC, worth $418 million, to Coinbase Prime. Since January 12, the total moved amounts to 41,478 BTC, surpassing $1.7 billion, revealing the challenges GBTC is facing with handling redemptions.
Expert’s Insight on Grayscale dumping BTC amid ETF redemptions
Ash Crypto notes that historically, GBTC did not sell Bitcoin but redeemed shares with USD. The approval of the spot ETF prompted investors to withdraw due to a hefty 1.5% annual management fee, which is significantly higher than competitors. The disappearance of a previous 40% discount on GBTC led to more investors exiting, forcing GBTC to sell BTC to meet redemption requests, impacting the short-term trajectory of Bitcoin.
The reasons for Grayscale’s outflows are sparking speculations, with some attributing the delay in outflow reflections in recent data to the T+1 accounting and settlement processes. Others point to Grayscale’s high ETF fees, particularly its 1.5% expense ratio, making it an expensive Spot Bitcoin ETF in America.
Scott Melker clarifies that Grayscale is not actively selling Bitcoin on the market, but when people sell shares of Grayscale’s GBTC, Grayscale has to sell a corresponding amount of Bitcoin to manage the fund. This is not a malicious act; it’s just how the mechanics of an ETF work.
Spot ETF Rotation Coming, Investors Stay Calm!
Ash Crypto anticipates a subsiding of selling pressure over the next 1-2 weeks, expecting the majority of funds leaving GBTC to rotate into other Bitcoin spot ETFs rather than exiting the asset class altogether. It is advised to exercise patience during this transition and warned against making impulsive decisions in the current short-term crisis.
Despite the challenges faced by GBTC, there is still overall net demand for Bitcoin exposure through spot ETFs, with $1.4 billion flowing into these products compared to $579 million leaving GBTC. Once the outflows from GBTC stabilize, the pent-up demand for spot ETFs is expected to drive the next leg higher for Bitcoin prices. The trading volume of nearly $10 billion in three days for Spot Bitcoin ETFs indicates a growing interest and a positive shift in investor sentiment.
Hot Take
Grayscale’s Bitcoin Trust (GBTC) is facing substantial outflows amid a crypto market downturn, posing challenges in handling redemptions. The shift to other Bitcoin spot ETFs is expected to stabilize these outflows and drive the next leg higher for Bitcoin prices.
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