Bitcoin falls despite the launch of ETFs. The fault of the Grayscale ETF exits which could last another 40 days…
Grayscale spoils the party
BTC/USD is down about 10% since the ETFs launched. However, the equivalent of several billion dollars has flowed into it.
Based on data as of January 22, a total of 648,326 bitcoins were in ETFs. It was 622,000 bitcoins just before the ETFs launched on January 10 due to the existence of Grayscale’s GBTC Trust, since transformed into an ETF.
In total, nearly 100,000 bitcoins were absorbed, but only around 26,000 BTC net. In other words, ETFs accumulate on average 3,700 BTC per day.
The difference comes from outflows from the GBTC ETF. In fact, Grayscale refuses to align with the competition’s management fees which are almost eight times lower (0.2%). So many customers are packing their bags.
And the fact is that it is not possible to move your bitcoins from one ETF to another. Investors are forced to sell their bitcoins to join a new ETF. Hence the downward pressure.
A total of 68,000 bitcoins left the GBTC ETF during the first seven days of trading!
Here is the count that prevailed at the end of last week to get an idea of the orders of magnitude:
Here is the distribution of bitcoins among the four largest ETFs at the time of writing:
-GBTC (Grayscale): ~536,000 BTC
-IBIT (BlackRock): ~40,000 BTC
-FBTC (Fidelity): ~34,000 BTC
-BITB (Bitwise): ~11,000 BTC
Why isn’t Grayscale stemming the bitcoin hemorrhage?
Grayscale charges juicy fees amounting to 1.5% per year, compared to 0.2% for its competitors. Which means that the fund could afford to see 87% of its BTC leave and still be financially successful.
The calculation is easy. 1.5% of ~82,000 BTC is equal to 0.2% of the 620,000 BTC the fund had under management just before the launch of the new ETFs.
But what makes Grayscale managers say that they will not lose more than 87% of their customers?
Grayscale may know that customers holding more than 12% of bitcoins won’t leave. For tax reasons? Indeed, selling ETF shares automatically triggers capital gains tax.
Another possibility: the leaders of Grayscale and its parent company Digital Currency Group are shorting bitcoin in their corner. It would therefore be in their personal interest to liquidate all or part of the Grayscale ETF.
Same thing for their customers who are leaving. They probably realize that it is in their interest to wait until all of the GBTC ETF customers have left. The goal is to take advantage of the downward pressure before rotating to other ETFs at a much better price.
The mystery deepens further when we know that a large part of the outflows from the GBTC ETF came from liquidations linked to the bankruptcy of FTX. The latter represented around a billion dollars according to CoinDeskor almost a third of outings.
Knowing that the bankrupt company Genesis also holds many shares of the GBTC ETF which will also have to be liquidated.
What timing…
Added to all this are the outflows of ETFs located on the old continent and other regions such as Brazil, Canada, etc. The BitMEX exchange deduces a net inflow of only $721 million:
At a rate of 14,000 BTC per day, the GBTC ETF will be empty within 40 days. Enough to accumulate a few more sats at low prices before the inevitable Bull Run.
Maximize your Tremplin.io experience with our ‘Read to Earn’ program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.
