In the evolving landscape of cryptocurrency investments, the Grayscale Bitcoin Trust (GBTC) has encountered a persistent outflow trend since transitioning into a spot Bitcoin exchange-traded fund (ETF).
Bianco Research and Farside data indicates that the total outflow of funds from GBTC has reached $7 billion as of February 16, 2024. Despite a notable slowdown in the outflow rate, industry observers suggest that further bleeding may be on the horizon.
Reasons behind continued outflows
As highlighted by industry experts, several factors contribute to the ongoing outflows from GBTC. One prominent reason is the endeavor of investors to rebalance their portfolios, opting for spot Bitcoin ETFs characterized by lower fees.
The emergence of new ETFs boasting reduced fees, ranging between 0 and 12 basis points, contrasts with Grayscale’s fee structure, which stands at a comparatively higher 150 basis points.
Moreover, GBTC has grappled with trading at a substantial discount to the market price of Bitcoin. This discount, approximately 44% below Bitcoin’s value, became particularly pronounced when BlackRock filed for its spot ETF in June 2023.
Jim Bianco, founder of Bianco Research, attributes a significant portion of the outflow to this “arbitrage-type” trade, suggesting that Grayscale’s objectives shifted upon the ETF conversion, prompting the closure of this gap.
Expert insights and projections
Nate Geraci, President of ETF Store, remains cautious about the trajectory of GBTC, anticipating a continued asset bleed. Despite the potential for substantial reductions in assets under management, Geraci notes the resilience of Grayscale, suggesting that even with significant asset decreases, the entity could still outperform other issuers in the market.
Geraci further speculates on Grayscale’s potential future moves, hinting at the prospect of launching a “mini-GBTC,” a distinct spot Bitcoin ETF featuring significantly lower fees. This strategic maneuver could respond to market demands for cost-effective investment vehicles, potentially stemming further outflows from GBTC.
Implications of genesis’s bankruptcy
Recent developments surrounding Genesis, a bankrupt crypto lender, add another layer of complexity to GBTC’s outlook. A judge’s approval of an order permitting Genesis to liquidate a portion of its investments in Grayscale assets, including GBTC, the Grayscale Ethereum Trust, and the Grayscale Ethereum Classic Trust, signals a potential influx of shares into the market.
Genesis’s holdings, valued at approximately $1.6 billion, could exert additional pressure on GBTC’s performance, potentially exacerbating the ongoing outflow trend.
