Grayscale Witnesses Massive Bitcoin Outflows After ETF Conversion
Grayscale, the world’s largest crypto asset manager, has experienced a significant decrease in its Bitcoin holdings following the conversion of its Bitcoin Trust (GBTC) into an ETF. Since January 10, when the conversion took place, nearly a third of GBTC’s Bitcoin has been withdrawn, totaling $9.26 billion in outflows. This trend continued on March 4, with 5,450 BTC, equivalent to $368 million, leaving the trust.
Outflows and Conversion to ETF
- GBTC has witnessed 36 consecutive days of outflows since its conversion to an ETF.
- A total of 5,450 BTC ($368 million) left the trust on March 4.
- Prior to the conversion, Grayscale held approximately 620,000 BTC.
- Investors can now redeem their shares for Bitcoin due to the ETF structure.
The conversion of GBTC into an ETF allowed investors to redeem their shares for Bitcoin, which was not possible under the trust’s previous structure. However, GBTC’s relatively higher fees compared to other ETFs have contributed to ongoing outflows. Despite this, GBTC currently holds 420,682 BTC valued at around $28.5 billion.
Predicting the End of Outflows
- Analysts have been closely monitoring the outflows and speculating when they might cease.
- Some slowdown in outflows was observed in late January and February.
- The scenario changed when Genesis was permitted to liquidate $1.6 billion worth of GBTC shares in mid-February.
- Bloomberg ETF analyst Eric Balchunas estimated that outflows would halt after a 25% share reduction.
- A poll suggested that many expect the outflows to end between a 35-50% range.
Grayscale’s Advocacy for Spot Bitcoin ETF Options
- Grayscale has been advocating for the SEC to approve options on spot Bitcoin ETFs.
- They argue that it would benefit GBTC investors and others by offering new ways to generate income and hedge financial positions.
- CEO Michael Sonnenshein highlights the potential for bringing additional stakeholders into the market and exposing spot Bitcoin ETFs to new investor classes and capital.
Performance of Other Spot Bitcoin ETFs
- Other spot Bitcoin ETFs have performed well amid the sustained Bitcoin rally.
- On March 4, these ETFs experienced their second-largest volume day, with approximately $5.5 billion traded.
- The BlackRock IBIT fund reported around $2.4 billion in daily volume, with assets under management surpassing $11 billion.
- Fidelity saw a record day for inflows on the same date, with $404.6 million entering the fund and offsetting the outflows from GBTC.
- The Bitwise Bitcoin ETF also saw significant interest, with $91 million in inflows, its highest since February 15.
Impact on Other Cryptocurrencies
The rise in Bitcoin’s price has had a positive effect on other cryptocurrencies. Meme coins such as Dogecoin (DOGE) and Shiba Inu (SHIB) coin have experienced notable increases as well.
Hot Take: Grayscale’s Bitcoin Outflows Continue Despite ETF Conversion
The conversion of Grayscale’s Bitcoin Trust into an ETF has not stopped the significant outflows of Bitcoin from the trust. Investors have been redeeming their shares, resulting in a total outflow of $9.26 billion since January 10. The ongoing outflows can be attributed to GBTC’s relatively higher fees compared to other ETFs. While some predicted a slowdown or end to the outflows, the bankruptcy court’s decision to allow Genesis to liquidate GBTC shares changed the scenario. Grayscale is now advocating for spot Bitcoin ETF options, emphasizing the benefits it would bring to investors and the market. Despite GBTC’s outflows, other spot Bitcoin ETFs have performed well, with high trading volumes and significant inflows.
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