Grayscale Transfers an Additional $900 Million in BTC to Exchanges
Discount vanishing and high fees have incentivised investor migration to more efficient spot ETFs.
FTX’s USD $1 billion liquidation likely the peak single-account outflow, but more selling is on the horizon.
However, the market shedding some of its recent games might be a necessary dip as the community gears up for the next Bitcoin halving.
Significant outflow has marred the spot Bitcoin ETF’s first few weeks of trading, with billions of dollars leaving the sector – specifically, investors are flocking out of Grayscale’s Bitcoin Trust (GBTC). The impact on BTC’s price and the overall crypto market has been significant, with Bitcoin falling 7% in the past week and more to potentially come. So, what’s really going on?
GBTC Discount Wiped, Investors Redeeming Bitcoin
Grayscale Bitcoin Trust was one of the earliest ways for TradFi investors to gain exposure to the Bitcoin price (but through futures contracts, rather than actual BTC). For various reasons, GBTC’s price traded at a discount of up to 40% from the actual value of the fund, which was quite attractive to investors at the time. However, that spread has disappeared as spot ETFs were approved, so much of the demand for GBTC has similarly dissipated.
At the current pace of selling, $GBTC still has enough assets to do this for another 60 days straight.
We’re paying for that spread trade in blood.
— Adam Cochran (adamscochran.eth) (@adamscochran) January 22, 2024
Tack on top of this that GBTC’s annual fee is 1.5% – 500% bigger than that of ProShares and Valkyrie, and it’s a recipe for major investors to move their assets out of GBTC. Because you can redeem your GBTC for Bitcoin, Grayscale has had to constantly transfer assets from their 600K+ BTC portfolio to Coinbase Exchange as investors switch funds or leave the scene entirely. The overwhelming sell pressure – even if these traders are buying back into another spot ETF – is a large reason for the drop in BTC’s price we’ve encountered over the past fortnight.
The Worst May Be Over
Perhaps the biggest outflow to come occurred yesterday, with the FTX exchange liquidating 22 million GBTC shares – worth close to USD $1 billion (AUD $1.5 billion) – as part of their bankruptcy proceedings.
Volume on the #Bitcoin ETFs remains very strong. Over $2 billion again today. $GBTC still making up a bit more than half.
Total volume in the first 7 trading days is just shy of $19 billion. pic.twitter.com/AGaJMsnC9S
— James Seyffart (@JSeyff) January 22, 2024
This is likely the biggest single-holder sale the community will see over the next few months, so the sale pressure may finally start to ease a little. However, there is still likely billions of dollars’ more outflows to come in the next couple of months, which may further drop the price of Bitcoin in the lead-up to this year’s halving event.
Although the ETF approval didn’t go as planned for Bitcoin’s price, once the dust settles from GBTC’s liquidation, the market might finally be ready to break the shackles of the lengthy crypto winter once-and-for-all.
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Filed under: Bitcoin - @ January 23, 2024 4:22 am