Grayscale's GBTC Sees Major Outflows Amid Shift to Lower-Fee Bitcoin ETFs
Summary:
Grayscale's Bitcoin ETF, GBTC, has seen a considerable outflow of funds, a trend experts predict could continue due to a shift towards lower-fee Bitcoin ETFs. Investors have been rebalancing their portfolios, causing GBTC's continuous outflow, which stood at $7 billion as of February 16. The fund may experience further loss following court approval for the bankrupt crypto lender Genesis to liquidate part of its Grayscale investments.
Despite a slowdown in fund outflows from Grayscale's Bitcoin ETF, many believe further losses may be imminent. As per Farside and Bianco Research, since the Bitcoin ETF's transformation, Grayscale's GBTC has witnessed an outflow of $7 billion up to February 16. Although the rate of outflow has significantly suppressed, Nate Geraci, President of ETF Store, warns that they may still see further withdrawals.
In January, the fund took the largest hit, with an outflow of $5.64 billion by the month-end. So far, February also witnessed a substantial outflow of $1.37 billion. Jim Bianco, founder of Bianco Research and renowned Wall Street analyst, surmises much of the outflow is due to investors recalibrating their portfolios and moving to spot Bitcoin ETFs with lower charges. To note, Grayscale maintains a 150 bps fee, while recently launched ETFs have reduced their fees between 0 to 12 bps.
Bianco also highlights another reason for Grayscale's sustained outflow: it traded at a significant discount - about 44% below Bitcoin's market price - when BlackRock filed for its spot ETF in June 2023. He explained, "A lot of money is being directed towards 'cheap' BTC." The outflow diminished when Grayscale converted to an ETF on January 11, 2024, closing the 'arbitrage-type' trade.
Nevertheless, Geraci envisages further asset dilution. He also prognosticates that Grayscale might introduce a "mini-GBTC," a separate low-fee spot Bitcoin ETF. Additional losses may also surface after a court approved Genesis, a bankrupt crypto lender, to liquidate part of its Grayscale investments. Court fillings state that Genesis held approximately $1.6 billion in shares of GBTC, Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG).
Published At
2/19/2024 9:06:23 AM
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