The Grayscale Bitcoin Trust (GBTC) encountered a substantial surge in outflows and trading volume during the preceding five trading days as investors exhibited a keen interest in exiting the fund, leading to an estimated total of $2.2 billion in capital withdrawals.
The conversion of investors in Grayscale’s Bitcoin Trust to a Bitcoin exchange-traded fund following the U.S. Securities and Exchange Commission’s (SEC) approval has sparked an unprecedented wave of sell-offs, the sheer magnitude of which has taken analysts by surprise.
The recent introduction of Grayscale’s Bitcoin ETF, alongside 10 similar products, marked a pivotal moment for the investment vehicle. Prior to this transformation, the Trust had operated as a closed-end fund, preventing investors from redeeming their shares for Bitcoin (BTC).
However, with its transition to an ETF, investors have seized the opportunity to cash out in significant numbers.
While other Bitcoin ETFs experienced substantial inflows, such as BlackRock’s iShares Bitcoin Trust (IBIT) which garnered $1.2 billion, GBTC suffered the highest outflow among them.
According to data revealed by Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, GBTC saw half a billion cashed out during its initial days of trading on U.S. exchanges. This amount reached $2.2 billion over the past five trading days.
WHEN WILL THE BLEEDING STOP? I don’t know, but this this is some serious daily outflows for The Nine to have to battle every single day.. they’ve done a great job so far but damn its a lot to ask.. pic.twitter.com/LqwPRETrQf
— Eric Balchunas (@EricBalchunas) January 19, 2024
Asked when the bleeding would stop, the ETF analyst said, “I don’t know, but this is some serious daily outflows for The Nine to have to battle every single day.. they’ve done a great job so far but damn it’s a lot to ask.”
The primary reason for the substantial outflows from GBTC can be attributed to traders seizing the opportunity to exit their positions and secure gains. Furthermore, GBTC carries the highest fee among all U.S. spot Bitcoin ETFs, standing at 1.5%.
In contrast, BlackRock’s IBIT offers a considerably lower fee of 0.12%. However, it is worth noting that this fee is set to increase to 0.25% in the coming 12 months.
This fee disparity is seen as another compelling factor motivating investors to cash out of GBTC.
Industry observers believe that the combination of locked positions and high fees has created a strong incentive for investors to pursue more cost-effective options.
Craig Salm, the Chief Legal Officer at Grayscale Investments, recently provided insights into the transformation of Grayscale’s Bitcoin GBTC trust into an exchange-traded fund (ETF).
“I believe the fee is certainly an important factor for investors when choosing which Bitcoin ETF to use for their investment. However, other crucial features like AUM, trading volume, liquidity, and spreads also contribute to the total cost of ownership of an ETF. It’s not just about the management fee,” Salm said when asked about GBTC’s fee.
