Grayscale’s Bitcoin Trust (GBTC) faces substantial outflows, totaling $594 million, amid a crypto market downturn. Simultaneously, Grayscale transferred 9,840 BTC worth $418 million to Coinbase Prime, bringing the total moved to 41,478 BTC since January 12. This action, surpassing $1.7 billion, correlates with handling redemptions, revealing challenges for GBTC.
Expert’s Insight on Grayscale dumping BTC amid ETF redemptions
Ash Crypto, in a recent tweet, chimed in into the intricacies, pointing out that historically, GBTC did not sell Bitcoin but redeemed shares with USD, making it a major BTC holder. However, the approval of the spot ETF has prompted investors to withdraw due to a hefty 1.5% annual management fee, significantly higher than competitors.
Plus, the disappearance of a previous 40% discount on GBTC has led many investors to exit, forcing GBTC to sell BTC to meet redemption requests. This process is expected to take weeks and is 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 on social media point to Grayscale’s high ETF fees, particularly its 1.5% expense ratio, making it an expensive Spot Bitcoin ETF in America.
Echoing a similar sentiment, Scott Melker, a crypto investor, clarifies that Grayscale is not actively selling Bitcoin on the market. Instead, when people sell shares of Grayscale’s GBTC (Grayscale Bitcoin Trust), 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, and he expects the majority of funds leaving GBTC to rotate into other Bitcoin spot ETFs rather than exiting the asset class altogether. He advises investors to exercise patience during this transition and warns 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, this 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.