Qadir AK
Qadir AK
Author
Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.
- Jan 19, 2024 10:38 UTC
- [article_wishlist article_id="262477" article_link="https://coinpedia.org/news/why-is-grayscale-dumping-bitcoin/"]
Story Highlights
Investors are leaving GBTC due to its high fees and the shrinking price difference with spot ETFs.
The selling pressure is expected to ease soon, and funds might shift to other spot ETFs.
Although some leave GBTC, Bitcoin exposure through spot ETFs sees significant inflows.
The crypto world can be tricky to navigate. What might be perceived as good news first can bring about a lot of twists and turns that even the most proficient analysts couldn’t have grasped.
As the crypto market faces a downturn, GBTC is seeing a notable outflow of $594 million. At the same time, Grayscale makes a strategic move by transferring 9,840 BTC ($418 million) to Coinbase Prime, totaling 41,478 BTC since January 12. This move is linked to managing redemptions, revealing the hurdles GBTC is navigating.
Why are Investors Leaving?
Ash Crypto shares insights, explaining GBTC’s historical practice of not selling Bitcoin but redeeming shares with USD. With the approval of the spot ETF, investors withdraw due to a hefty 1.5% annual management fee, higher than competitors. The disappearing 40% discount prompts a mass exit, leading GBTC to sell BTC to meet redemption demands and affecting Bitcoin’s short-term path.
— Ash Crypto (@Ashcryptoreal) January 18, 2024🚨 IMPORTANT 🚨
Why is Grayscale Dumping BTC ?
Before the spot ETF approval, GBTC used to redeem its shares by giving investors USD value, but they never sold the BTC.
That's why Grayscale became one of the largest BTC holders, beside Satoshi.
Now, with the spot ETF…
The reasons for GBTC’s outflows spark speculation. Some attribute the delay in outflow reflections to accounting processes. Social media raises concerns about GBTC’s high ETF fees, particularly its 1.5% expense ratio, making it a relatively expensive Spot Bitcoin ETF in America.
Read More: Grayscale, BlackRock, and Fidelity Rule Bitcoin ETFs with $1.6B Trading Volume
Inside GBTC’s Mechanics
Scott Melker, a notable crypto investor, clarifies that Grayscale isn’t actively selling Bitcoin on the market. Instead, selling GBTC shares triggers corresponding Bitcoin sales to manage the fund. This isn’t a malicious act but reflects how ETFs work.
— The Wolf Of All Streets (@scottmelker) January 18, 2024Grayscale is not actively “dumping on the market.”
People are selling GBTC which means grayscale has to sell the equivalent amount of bitcoin.
It’s not nefarious. It’s simply the mechanics of an ETF.
Investors, Stay Calm and Stay Patient!
Ash Crypto predicts reduced selling pressure in the next 1-2 weeks, suggesting funds leaving GBTC might shift to other Bitcoin spot ETFs. During this transition, investors are encouraged to be patient and avoid impulsive decisions.
Despite challenges, there’s overall demand for Bitcoin exposure through spot ETFs. While $579 million leaves GBTC, a substantial $1.4 billion flows into spot ETFs. Once outflows stabilize, this pent-up demand is expected to boost Bitcoin prices. The impressive trading volume of nearly $10 billion in three days for Spot Bitcoin ETFs signals growing interest and a positive shift in investor sentiment.
Also Read: Ethereum ETF on Hold as SEC Delays Approval, Pushes Date to Match
High fees vs. convenience: Where do you stand on the GBTC debate?
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