Crypto Price Slump and GBTC Outflows Impact Digital Investments Globally
Summary:
The recent downturn in cryptocurrency prices, led by massive outflows from the Grayscale Bitcoin Trust (GBTC), may have triggered similar outflows from digital investment products in Europe and Canada according to CoinShares. Notably, digital asset products in Germany and Switzerland witnessed the highest outflows during January 22-26. A decrease of $500 million was also attributed to the second week of spot Bitcoin ETF trading in the U.S. Despite these outflows, newly issued spot Bitcoin ETFs have managed to record $5.94 billion in inflows since they began trading on January 11.
The ongoing downturn in cryptocurrency prices, instigated by massive outflows from the Grayscale Bitcoin Trust (GBTC), might be the catalyst for the corresponding outflows from digital investment products in Europe and Canada, CoinShares suggests. The report dated January 28 explains that the price decrease caused by GBTC's significant outflows, aggregating to $5 billion in the U.S., probably spurred further outflows in other geographical areas.
During the investment week ranging from January 22 to January 26, the digital asset offerings of Germany and Switzerland were most affected, experiencing outflows of $31.7 million and $59.8 million respectively, as per the CoinShares' data. Meanwhile, throughout the month, Canadian digital offerings recorded the most significant outflows, totaling $209.8 million, closely followed by those in Sweden and Germany, which registered outflows amounting to $34.2 million and $124.5 million respectively.
In terms of inflows, Brazil's digital asset products were the only ones showing notable input last week, garnering $10.3 million. However, nearly $500 million was drained away due to the second week of spot Bitcoin ETF trading in the U.S., CoinShares has noted.
Despite nine new spot Bitcoin (BTC) ETFs collecting nearly $1.8 billion in inflows, it was insufficient to stem the tide of outflows from Grayscale’s now transformed spot Bitcoin ETF, GBTC, which lost over $2.2 billion over the week. Nonetheless, the withdrawn sum from GBTC has started to alleviate, with the daily withdrawal rate progressively reducing across the week.
For multiple years, GBTC presented investors with a lucrative opportunity. Investment stories of profiting through borrowing to buy into the fund and then reaping profits from Grayscale's premium, that peaked at 43% in July of 2019, had been abundant. However, this profitable trade trend disappeared abruptly when the premium turned into a discount in February 2021.
Due to a mandatory six-month hold period for investors buying GBTC shares, many remained stuck with the fund, hesitant to sell their shares continually depreciating. Following its transformation into a spot Bitcoin ETF, the GBTC's discount has fallen from 1.55% to 0% on January 26, according to YChart’s data.
While GBTC has lost $5 billion this month, CoinShares points out that the newly launched spot Bitcoin ETFs have seen inflows totaling $5.94 billion since their trading commenced on January 11.
Related: With an aggressive advertising campaign behind it, BlackRock drops its 'Boomer' Bitcoin ETF ad.
In other news: The 'Wolf of All Streets' expresses deep concern about the implications of Bitcoin reaching a value of $1 million.
Published At
1/30/2024 3:18:26 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.