Grayscale's Bitcoin Trust Experiences Substantial Outflows Following Transition to ETF
Summary:
Grayscale's Bitcoin Trust (GBTC) experienced significant capital outflows following its transition to a Bitcoin-focused ETF, leading to a drop in its assets under management by almost $5 billion. The move, following approval by the SEC, allowed GBTC holders to convert their shares for Bitcoin. As a result, approximately $1.1 billion flowed out of the ETF as investors sought lower fees from other providers. Amidst these outflows, GBTC competitors witnessed net additions to their portfolios, with the most significant portion attributed to BlackRock's ETF.
The Bitcoin Trust operated by Grayscale (GBTC) saw a massive increase in capital outflow following its establishment as a Bitcoin-focused exchange-traded fund (ETF). The Trust's assets under management dropped by nearly $5 billion. Data figures indicate a decrease from $28.5 billion on January 10 to $23.7 billion on January 18, as recorded by YChart and Grayscale. The dip in Bitcoin's market value also contributed to the decline in the ETF's asset volume. As the ETF's main asset, Bitcoin's fluctuating value directly influenced the fund's overall worth. Market data showed Bitcoin's price had declined by 4% over the course of the week, trading at $40,582.
Capital outflow from GBTC was not unexpected following its approval by the Securities and Exchange Commission (SEC) on January 10. The greenlight by SEC enables GBTC stakeholders to convert their shares and redeem them for Bitcoin, a prospect absent prior to the endorsement. In the absence of conversion opportunities, investors previously exited their positions by offloading shares via the secondary market. A total sum of approximately $1.1 billion exited Grayscale’s ETF within a period of three days as stakeholders sought reduced fees from rival providers. They also capitalized on a slight markdown on shares. SkyBridge Capital’s founder, Anthony Scaramucci, intimated that specific GBTC investors absorbed losses as they moved towards more cost-effective ETF options. To contextualize the price difference, GBTC charges a 1.5% fee, while competing ETFs command fees as low as 0.20%, inclusive of a 6-month investment-free grace period.
CoinRoutes' CEO Dave Weisberger highlighted that the composition of GBTC stakeholders might have a bearing on the outflow trend. Current market behaviors may also be influenced by panic selling in addition to hedging traders seeking discounted rates and investors flocking towards more affordable charges. “Taxable accounts either making profits or resorting to panic selling to retain them are the key issue. Unfortunately, we are unable to determine what percentage of these accounts exist, or their average entry price,” noted Weisberger.
Even as GBTC grapples with teething issues after its transition into a standard ETF, other Bitcoin funds are experiencing divergent movements. Market data shows that while GBTC was dealing with capital outflow, other issuers introduced an extra 10,667 Bitcoins into their portfolios on the fifth trading day amid increased trading activities. New records show an estimated $440 million bump in Bitcoin issuers' holdings. BlackRock's ETF notably accounted for a substantial portion of this increase, amassing roughly 8,700 BTC, which grossed nearly $358 million. On the whole, nine ETFs (excluding Grayscale) have collectively acquired an estimated 68,500 Bitcoins since they began operation.
Published At
1/19/2024 9:23:33 PM
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