Bitcoin has been experiencing increased downward pressure over the weeks since the first batch of spot BTC exchange-traded funds (ETFs) began trading in the United States. The leading cryptocurrency peaked at around $49,000 – its highest valuation in almost 2 years- but had all its gains erased as outflows took center stage on the ETF’s trading volume.
Digital asset manager Grayscale’s GBTC has been dominating the Bitcoin ETF market’s trading volume but has seen massive outflows as investors rushed to redeem their shares for cash or rotate them into offerings charging lower fees.
On January 23, BTC dropped below the coveted $40,000 level for the first time in seven weeks, at one point, changing hands for as low as $39,664.
Bitcoin Slides To 2-Month Low As GBTC Outflows Dominated ETF Trading Volumes
Tuesday’s decline was the result of the now-defunct cryptocurrency exchange FTX selling close to 23 million shares worth $1 billion it held in the Grayscale Bitcoin Trust (GBTC).
It is estimated that around $515 million worth of Bitcoin left the ETF on Tuesday, which came on the back of $640 million in outflows recorded on Monday. This brings the total outflows from GBTC since its launch on January 10 to just over $3.96 billion.
According to data procured by BitMEX Research, between all the 10 spot Bitcoin ETFs that were green-lit by the Securities and Exchange Commission (SEC), net outflows reached $106 million on January 24. At the same time, net inflows across all the listed ETFs were about $983 million, the firm noted.
Slowdown of GBTC Outflows Expected to Stabilize Bitcoin Price
ETF expert James Mullarney noted a significant slowdown in outflows from GBTC, which he says is a positive sign as it will potentially stabilize the price of Bitcoin and also help bolster investor confidence in the crypto asset.
Ever since GBTC first launched as a close-ended trust in 2013, Grayscale has been criticized for the high fees it charges. While the crypto asset manager did drop the fund’s fee from 2% to 1.5% after converting it into a spot ETF, the competition is fierce.
Comparatively, the fees charged by BlackRock’s iShares Bitcoin Trust (IBIT) exchange-traded fund is 0.12%, which is said to be one of the lowest among the 10 listed spot Bitcoin ETFs. It is not surprising that the Bitcoin fund handled by the world’s largest asset manager has attracted $1.6 billion since its launch.
IBIT’s fee will rise to 0.25% after 12 months, which is still considerably lower than the amount charged by GBTC.
Bitcoin ETF Issuers Accumulate Over 100,000 BTC In Seven Days
The spelling spree on GBTC has resulted in other ETF issuers not only rushing to get their hands on Grayscale’s Bitcoin stash but also increasing their holdings significantly. They are now acquiring Bitcoin at a rate that is 15 times higher than the daily supply.
Investment giants BlackRock and Fidelity are estimated to be buying an average of $433 million worth of BTC every day. The two firms collectively hold more than 64,000 BTC which is valued at nearly $2.6 billion at the current rate.
While Grayscale dumped over 80,000 BTC ($3.1 billion) after GBTC began trading, nine of the spot Bitcoin ETFs, including funds from BlackRock, Fidelity, ARK 21Shares, Invesco Galaxy, Bitwise, and VanEck, collectively purchased 102,613 BTC, worth $4.1 billion at current rate, in the first week of trading.
The total amount of Bitcoin purchased by the ETFs in only seven days of trading accounts for 53% of all the Bitcoin amassed by MicroStrategy. The business intelligence firm, deemed to be the world’s largest corporate holder of Bitcoin, holds an aggregate of 189,150 BTC. The stash is worth a cool $7.5 billion.
Bloomberg ETF analyst Eric Balchunas highlighted that there was a significant net inflow to the Bitcoin ETFs on the ninth day of trading, indicating a resurgence of investor interest and a potential shift in market sentiment towards the apex cryptocurrency.
JPMorgan Says Grayscale Could Lose Additional Bitcoin Worth $10 Billion
However, JPMorgan warned last week that despite Bitcoin’s slide being abated for the time being, things could get worse for Grayscale. Analysts estimate that an additional $10 billion worth of BTC could leave GBTC in the coming months.
The ETF is the largest commodity-backed Bitcoin fund in the world. As of January 18, 2024, GBTC owns 581,274 BTC worth $23.2 billion.
At the time of writing, Bitcoin (BTC) is trading at $39,853 – up 0.5% in the last 24 hours