Grayscale GBTC Outflows And BTC Price Action: What To Know
Grayscale GBTC Exodus Sparks Market Turbulence
The massive Grayscale Bitcoin Trust (GBTC) outflows that occurred following the January 11 spot BTC ETF approval have reshaped Bitcoin’s market dynamics. A comprehensive market analysis by the foremost crypto firm, Bitfinex, attributed it as a critical catalyst behind Bitcoin’s recent price correction.
According to Bitfinex Alpha’s latest findings, the sizable sell-off of GBTC shares, including the sales by the insolvency-stricken exchange FTX, played a pivotal role in the recent BTC price decline.
The Impact On The Market
Jag Kooner, the head of derivatives at Bitfinex, highlights the outflows totaling $4.3 billion after GBTC’s conversion to a spot Bitcoin ETF. This amount contrasts with the highest inflows of $1.82 billion recorded by BlackRock’s iShares Bitcoin Trust (IBIT).
Nevertheless, Grayscale’s GBTC remains the largest Bitcoin ETF, managing assets worth approximately $24 billion, although this is a decrease from its $28.6 billion AUM before the conversion. The Bitfinex report also highlighted the sale of 22 million GBTC shares worth almost $1 billion by FTX as another significant factor, with the bankrupt exchange seeking much-needed funds to settle its creditors.
Another crucial factor outlined in the report is the impact of spot BTC ETF fees. Kooner pointed out the disparity in costs between Grayscale and its competitors, with Grayscale charging a higher fee of 1.5% compared to competitors’ fees, which ranged from 0.2% to 0.9%.
This discrepancy has incentivized investors to move their funds to lower-cost Bitcoin ETF options. As February approaches, ETF data suggests a cooling of trading volume between Bitcoin ETFs, indicating a settling of capital movement. Yet, Kooner cautions that outflows will likely persist unless there is a change in fee structure.
Competition Among Bitcoin ETFs Heat Up
Meanwhile, the competition among spot Bitcoin ETFs rises, as several issuers have announced a zero-fee structure for the next six months. The Newborn Nine, a group of ETF issuers including Grayscale, Ark Invest, and BlackRock, have all slashed their fees in recent weeks to attract investors and gain market share.
Grayscale, once charging a 2% management fee, now offers its ETF with a reduced fee of 1.5%, while Ark Invest has dropped its fee from 0.8% to a mere 0.25%. However, BlackRock’s announcement of a 0.12% fee for the first 12 months sparked the fee war, prompting other issuers to follow suit with promotional fee waivers.
Several issuers had chosen to waive their fees entirely for specific promotional periods. This move has paid off handsomely, with the Newborn Nine collectively amassing approximately $6.4 billion in assets under management in 13 trading days.
While ETFs offer zero commission trading options, exchanges like Coinbase and Kraken charge over 0.25% on each trade, making ETFs a more cost-effective option for custodial Bitcoin ownership.
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