Understanding Grayscale Bitcoin Trust (GBTC)’s $7.4 Billion Outflows in 31 Days

Understanding Grayscale Bitcoin Trust (GBTC)’s $7.4 Billion Outflows in 31 Days
Understanding Grayscale Bitcoin Trust (GBTC)’s $7.4 Billion Outflows in 31 Days

The largest Bitcoin exchange-traded fund (ETF) in the world, Grayscale Bitcoin Trust (GBTC), has had steady withdrawals for a full month. According to Bloomberg data, up until Monday, GBTC saw $7.4 billion leave the fund over 31 trading days. In sharp contrast, since its start, all nine of the other newly created spot Bitcoin ETFs have experienced net inflows. 

What is Behind GBTC’s Significant Outflows?

Grayscale’s continuous outflows can be attributed to several variables. Despite being the biggest and most regularly traded Bitcoin ETF, GBTC is the most expensive product on the market due to its 1.5% administration fee. By contrast, the majority of its rivals charge less than 0.3%. Moreover, bankrupt estates have attempted to sell their GBTC assets, among them Genesis Global Holdco LLC. Industry watchers are surprised by the persistence of GBTC’s outflows despite these circumstances. Although outflows were expected because long-term holders were waiting for the fund to convert, Vident Asset Management emphasized that the length and consistency of the outflows were remarkable.

Vice President of Vident Asset Management Amrita Nandakumar expressed his concern to see it reach thirty, however, he went ahead to suggest that it would surprise him if it lasted for another 60 days. In contrast to the peak of $640 million in January, outflows have eased off in the last few days, with only $22 million leaving the fund on Monday. Still, with over 3,400 US-listed ETFs, GBTC has the second-largest year-to-date outflow ($7.4 billion). 

Inflows of Other Spot Bitcoin ETFs Explained

The other nine prominent Bitcoin ETFs, which were launched in January, are attracting billions of dollars during the cryptocurrency’s boom, but GBTC struggles with withdrawals. Leading companies in the sector, BlackRock and Fidelity, have accumulated approximately $6 billion and $4 billion, respectively, and are followed by Bitwise and Ark Invest. 

Remarkably, there has been a net withdrawal from Gold ETFs, which may have been prompted by the growing interest in American stocks among international investors. As of February 14, 2024, the top 14 Gold ETFs have seen outflows totaling $2.4 billion this year. Nevertheless, GBTC continues to command a devoted fan base among enthusiasts because it has overcome regulatory barriers. Nandakumar posited that investors who are devoted to Grayscale and value their opposition to the SEC may ignore GBTC’s comparatively high charge. Compared to Bitcoin, which has increased by about 34%, the share price of GBTC has increased by 40% so far this year.

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