Greyscale’s GBTC exit reaches $7B amid recovery, but ‘bleeding’ to continue

Greyscale GBTC is experiencing an outflow. The data shows that as of February 16, the total withdrawals from GBTC after the Bitcoin ETF was switched to positions reached $7 billion.

While the figure appears to be falling sharply, the one-time flagship fund is seeing strong competition from ETFs from BlackRock and Fidelity, which have grown their asset bases with income streams.

The cost of GBTC reached 7 billion dollars

The highest level of migration took place in January, with $5.64 billion withdrawn from GBTC by the end of the month, while February saw only $1.37 billion withdrawn so far. This mainly reflects the slowdown in spending.

In a recent tweet, ETF Store President Nate Gerasi said GBTC is expected to bleed more. Although the pace of outflows has slowed significantly, market experts suggest that the trend of inflows may continue for some time.

GBTC is slowing down with AUM still north of 20B

A bet that investors can easily take advantage of was wrong on this occasion and I thought it was me.

— Jake (@EconomPic) February 19, 2024

GBTC already had a strong position in the spot ETF market, accounting for more than half of the trading volume. However, Kaiko's latest figures show a significant decline in its market share, falling to 30% as recently as last week.

Things that are responsible for going out

It's important to note that ten of the eleven BTC ETFs that started trading on January 11 started with zero assets. Greyscale, on the other hand, was a spin-off from a closed-end fund that started at around $29 billion in BTC.

According to Jim Bianco, founder of Bianco Research and former Wall Street analyst and analyst, there are two main reasons for GBTC's exit.

First, competition from other funds offering lower fees drove investors away from Greyscale, which charges a relatively high 150 basis points (bps). Meanwhile, rival funds have lowered their fees by 0 to 12 bps, making them more attractive options.

Second, prior to its conversion to an ETF, Grayscale was consistently trading at a significant discount to the BTC price as a closed-end fund. This reduction reached a significant 44% on June 13, 2023. However, the introduction of the Spot BTC ETF on June 15, 2023 by BlackRock has prompted investors to look for cheaper BTC options.

Therefore, when the grayscale transitioned to ETFs on January 11, 2024, investors closed this “arbitrage type” trade, achieving their investment objectives and leading to visible outflows.