Why Greyscale’s Bitcoin ETF Will Dry BTC in 96 Days

Since their launch in early January, Bitcoin exchange-traded funds (ETFs) have had a significant impact on the crypto market. Even index watchers are impressed with the record performance of these financial products.

However, one of the most popular products, Greyscale's Bitcoin Trust (GBTC), has experienced a steady flow, raising concerns about its future.

Greyscale's GBTC Bitcoin Reserve has been depleted

Arkham Intelligence, a blockchain analytics company, has predicted that GBTC could deplete bitcoin reserves within the next 96 days if current redemption rates continue.

Since switching to a Bitcoin ETF position in January, Greyscale's Bitcoin balance has fallen by 266,470 BTC. This represents a significant decrease from his initial holdings of approximately 620,000 BTC.

The downward trend is due to the consistent flow of GBTC with an average of 25,900 BTC per week.

“Grayscale started the year with 618,280 BTC for their Bitcoin Trust GBTC. Now they only hold 356,440 BTC. If they continue like this, it's only 14 weeks until it's over for good,” said analysts at Arkham Intelligence.

Read more: How to trade Bitcoin ETF: A step-by-step approach

Grayscale CEO Michael Sonnenschein attributed the expected outflows mainly to profit-making investors and arbitrageurs who left the fund. On the other hand, market observers attributed the GBTC flows to its high fee structure. At the same time, Eric Balchunas, senior ETF analyst at Bloomberg, pointed out that last week's outflows were mainly from the defunct crypto lender Genesis.

Grayscale is exploring various initiatives to combat this outflow. Some of these include the introduction of micro-funds that offer a cost-effective alternative to GBTC. Sonnenschein cited the company's plan to lower its fees to 1.5%, which is in stark contrast to competitors' rates of 0.2% to 0.5%.

“We've seen this in countless other exposures, in countless markets, you name it, typically when products are earlier in their life cycle, when they're new, these tend to be higher. And, as those markets mature, and funds grow, those fees will decrease, and we expect the same to happen for GBTC.