8 months ago
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Before the conversion on January 11, GBTC held 624.28K BTC but this amount has since dropped to 434.36K BTC as of March 4.
The US spot Bitcoin exchange-traded funds (ETFs) have been a massive smash hit, tipping the cryptocurrency at the cusp of its 2021 all-time high of $69K. Amidst the frenzy, the spot BTC ETFs have hit new records based on flows and daily trading volumes.
On March 4, the ETFs recorded the second-largest trading volume of $5.5B, as noted by Bloomberg senior ETF analyst Eric Balchunas. Blackrock’s iShares Bitcoin Trust (IBIT) accounted for $2.4B of yesterday’s overall trading volume and crossed $11B in AUM (assets under management).
The ten bitcoin ETFs a virtual lock to clock their second biggest volume day today. So looks like the big bump up in trading activity last week was more new normal than anomaly. pic.twitter.com/dOfIQ7hhS2
— Eric Balchunas (@EricBalchunas) March 4, 2024
Additionally, each ETF saw a 30% surge in trading volume in the past six days. As such, Eric asserted that the record-breaking trading volumes were a new normal rather than an anomaly.
GBTC Outflows Slash Grayscale’s BTC Holding
Despite the frenzy and new records in daily trading volumes, the ETFs, especially Grayscale’s GBTC, have seen significant outflows. For perspective, trading volumes refer to the total number of shares/units traded within a specified period, while flows track money movement into or out of investment products. Hence, outflows refer to capital outflow or selling of investment products.
For GBTC, outflows have dominated its trading sessions since its conversion to ETF on 11 January 2024. It hit records outflows on January 22 and February 29 at $641M and $599M, respectively.
On March 4, the net flow hit $562M for all the spot ETFs, but GBTC recorded an outflow of $368M. On the same day, other smaller spot BTC ETFs like Invesco’s BTCO, VanEck’s HODL, and Wisdomtree’s BTCW also recorded outflows.
When zoomed out and tracked from the ETF conversion day, GBTC has seen a cumulative outflow of $9.266B as of March 4.
In BTC terms, that translates to 202.87K BTC sold by investors who previously had shares in GBTC since 11 January. On March 4 alone, GBTC recorded an outflow of 5,450 BTC. This translates to a 33% drop in BTC holding since the GBTC ETF conversion.
5,450 Bitcoin of GBTC outflow today
Total GBTC outflow since 11th Jan 2024 is 202,874 Bitcoin
This is a decline in Bitcoin holdings by around 33% since ETF conversion https://t.co/2rdWsBd4j0
— BitMEX Research (@BitMEXResearch) March 4, 2024
Before the conversion on January 11, GBTC held 624.28K BTC at an average price of $46K, worth approximately $28.7B. At the time of writing, GBTC’s BTC holding has dropped to 434.36K, as per Arkham Intelligence data.
Market watchers have cited many reasons for massive GBTC outflows. Initially, the high fees imposed by GBTC were the primary reason. The rest of the ETFs kept their fees below 0.5%, but GBTC maintained the highest charges at 1.5%.
Alternatives from other spot BTC ETFs and investment products offered investors cheaper ways to gain exposure to BTC. So, investors either cashed out or sought alternative options after the conversion.
The final compelling reason was the bankrupt firms selling off their stake in GBTC to pay out their creditors. From FTX to Genesis, these bankrupt crypto firms opted to sell their stake in GBTC worth billions to settle their creditors.
Collectively, the massive selling of stakes held by bankrupt firms, high fees, and alternatives to gain BTC exposure led to the outflows and shrunk GBTC’s BTC holding.
