Grayscale GBTC exodus shakes up Bitcoin market dynamics

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A new market report from Bitfinex suggests that a sizable sell-off of Grayscale Bitcoin Trust ETF shares, partly driven by bankrupt exchange FTX, significantly impacted Bitcoin’s recent drop in value in January 2024.

According to the update from Bitfinex Alpha, the realization of profits following Grayscale’s successful conversion of its GBTC trust to an exchange-traded fund (ETF) was a significant influence on the marketwide correction that took BTC from $48,700 to $38,600 in a matter of days.

Grayscale (GBTC) and IBIT (Ishares, Blackrock) spot ETF flows reflecting the largest total positive and negative flows for spot Bitcoin ETFs. Source: etf.com/Bitfinex Alpha

The report highlights $4.3 billion outflows following GBTC’s conversion to a spot Bitcoin ETF on Jan. 16. Conversely, the highest net inflows for an individual spot Bitcoin ETF were to BlackRock’s iShares Bitcoin Trust, attracting $1.82 billion.

Related: Fidelity Bitcoin ETF rakes in reported $208M, offsetting Grayscale outflows alone

Bitfinex analysts also draw attention to the impact of ETF flows on BTC price, illustrated by the fact that there was no flow of funds into the respective spot Bitcoin ETF on Saturday, Jan. 20.

Grayscale’s GBTC remains the largest Bitcoin ETF, with its total assets under management hovering around the $24 billion mark despite dropping from $28.6 billion before its conversion from a trust.

FTX sells GBTC shares while ETF fee battle begins

The Bitfinex report also notes that converting Grayscale’s trust to a spot Bitcoin ETF facilitated the sale of significant shares held by bankrupt cryptocurrency exchange FTX. FTX sold 22 million GBTC shares, valued at nearly $1 billion, completely liquidating its shares.

Another factor that Bitfinex Alpha’s analysts note is the influence of fee rates of the respective Bitcoin ETFs as another driver of sales of GBTC shares. The report notes that Grayscale’s competitors currently charge fees ranging from 0.2 to 0.9 percent, while GBTC’s fee remains at 1.5 percent:

“This higher fee structure might be influencing the migration of investors from GBTC to other ETFs, particularly towards traditional finance (TradFi) giants that have more experience in managing ETFs.”

Data reflects a cooling of trading volume between Bitcoin ETF funds towards the end of January 2024. Source: Bitfinex Alpha/CryptoQuant.

The analysts suggest that investors are looking for more cost-effective ways to gain exposure to Bitcoin, which has impacted the shift of capital within the nascent Bitcoin ETF space. As January draws to a close, ETF data suggests that the movement of capital between the various ETF funds is beginning to settle.

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