The Grayscale Bitcoin Trust (GBTC) bleeds as BTC price hovers around the $38K level, which is not what the investors were hoping for. GBTC is now down by more than 7% in the last 5 days. Same with Bitcoin, it is bleeding with a heavy decline of over 9% in the last 7 days.
Grayscale bleeds with ETF hype
Data from Bloomberg Intelligence revealed that GBTC witnessed a major outflow of $2.8 billion after converting into an exchange-traded fund (ETF) on January 11.
Despite Grayscale’s historical dominance in providing exposure to Bitcoin for individual investors, the conversion of GBTC into an ETF led to a massive outflow. In contrast, within the first six trading days, nine newly launched spot Bitcoin ETFs attracted around $4 billion in inflows. Notably, funds managed by BlackRock and Fidelity Investments each secured over $1 billion in inflows during this period.
As of the latest available data, Grayscale’s Bitcoin fund remains the largest, holding $22.9 billion in assets. The Securities and Exchange Commission (SEC) approved the launch of spot Bitcoin ETFs earlier in the same month, marking a significant shift in the regulatory approach after repeated rejections.
Grayscale Bitcoin Trust GBTC has been a popular choice for individual investors seeking Bitcoin exposure without directly holding the cryptocurrency. However, GBTC was not an ETF, and its structure didn’t allow for easy redemption of shares for underlying Bitcoin. The fund had experienced trading at a premium or discount to the Bitcoin it held, with a discount peaking at nearly 50% in December 2022.
What’s next for GBTC?
Grayscale filed a lawsuit against the SEC in 2022 after the rejection of its previous attempt to transform the Bitcoin trust into an ETF. Following the conversion, the fund’s discount narrowed to near zero.
Analysts at JPMorgan suggested that investors taking profits on GBTC and transitioning to lower-fee alternatives contributed to dragging down the broader crypto markets. While there were expectations that new Bitcoin ETFs would attract significant investment, the price of Bitcoin has fallen over 10% since the SEC’s approval.
The intense fee competition among asset managers was evident before the funds’ launch. Grayscale reduced the fee on its Bitcoin trust from 2% to 1.5%, while competitors like BlackRock and Fidelity offered promotional rates as low as zero for the initial months.
Michael Sonnenshein, Grayscale’s CEO, defended the fund’s 1.5% fee, emphasizing its warranted nature due to liquidity, tight spreads, and a decade-long track record. Despite the recent challenges faced by Grayscale, the company remains a notable player in the evolving landscape of cryptocurrency investments.
