Bitcoin and ETF traders are overstating the impact of the GBTC selloff
The site's Bitcoin (BTC) exchange-traded fund (ETF) instrument was launched on January 12. The first trading session was somewhat chaotic as investors had no clue what the actual flow was and the market makers themselves faced various issues. Liquidation time for each device. Still, the $4.66 billion volume on Bitcoin spot-based ETFs is a record high in the traditional financial industry, but is this enough to justify Bitcoin's rally above $47,000?
Greyscale GBTC's outflows have met the majority of industry revenues.
There has been some criticism regarding Greyscale GBTC, which previously existed as a trust fund and had over $27 billion of BTC under management. In the first three trading days, this instrument experienced a net inflow of $1.17 billion. Most of that activity occurred on January 13th and January 16th, offsetting 86% of the flow into Bitcoin ETFs elsewhere during that period. In absolute terms, this translates to a total net flow of $157 million over 2 days.
Most of the $782 million in net income was in the first trading session, highlighted in the data provided by Bloomberg ETF analyst Eric Balchunas. Due to different settlement times, the arbitration desks were unable to leave their GBTC positions on January 12. For example, a short (negative) position in CME Bitcoin futures could have been used to offset a long (positive) position in GBTC. The discount at which the fund's shares used to trade before the spot ETF was approved.
Critics are right to assume that most of the Bitcoin ETF income is combined with the outflows of Greyscale GBTC, but if one excludes the first trading day, there is a total net income of $157 million 2-day in BlackRock products. Fidelity, Bitwise, Ark/21 Shares, Invesco and other ETFs. The question that investors should consider is whether the outflow from GBTC will continue and if the overall net outflow is sustainable in the long term.
Assuming the same pattern continues for the next month, with GBTC experiencing $11.3 billion in net inflows and the rest of the ETF competitors capturing $13 billion in net inflows, what is the expected price impact on Bitcoin at $1.7 billion? America? From a business perspective, those ETFs traded $1.9 billion on Jan. 16 alone, and that number seems insignificant.
The continued demand for spot Bitcoin ETFs is unquestionable.
Because buyers and sellers are always matched in every financial market, traders confuse volumes and flows. However, it is impossible to know whether the seller is simply closing out a position he acquired earlier in the day, or whether the buyer is making a contra trade in comparable markets or on different exchanges to take advantage of arbitrage opportunities.
Related: VanEck to cancel Bitcoin Strategy ETF, citing performance and investor interest
One thing is for sure: Greyscale GBTC's payout is 1.5%, while other competitors offer 0.25% or less, chances are investors will gradually migrate their holdings. So, with GBTC holdings somewhat stable, whether this move takes 20 or 120 days to reach a certain level, investors should focus on buying the remaining $157 million in two days.
I find it amazing how the market reacts to the GBTC selloff.
Someone is shopping.
— Byzantine General (@ByzGeneral) January 17, 2024
X Social network user ‘Byzantine General' asked this exact question on January 17th, indicating that there is a real ongoing demand for spot Bitcoin ETFs. At current price levels, Bitcoin miners receive $76.1 million worth of newly minted coins every 2 days, so the recent ETF's net income is at least 2 times that price. Additionally, regardless of the resulting price impact, Bitcoin will change dramatically after the April halving.
It seems premature to assume that margin position ETF buying will continue to offset net inflows from Greyscale's GBTC funds, and data could easily shift to support the industry's overall assets under management, including CME's Bitcoin futures open interest. Still, Bitcoin bulls will eventually deplete or liquidate GBTC holdings, paving the way for a bull run above $47,000 as investors realize that Bitcoin's influence on the supply side will be halved.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
