BTC/USD has returned to levels that prevailed just before the launch of Bitcoin ETFs. When is the bull run?
Why is bitcoin stalling?
Bitcoin fails to gain altitude despite the undeniable success of ETFs which have already swallowed 95,000 BTC.
For two reasons.
The first is that BlackRock and others had already purchased part of the bitcoins necessary to absorb the demand in the first days. Part of these 95,000 BTC therefore did not fuel upward pressure.
The second is that the GBTC ETF (which existed since 2013 in the form of a Trust containing more than 619,000 BTC) is losing its customers. The latter are moving towards new ETFs whose management fees are almost eight times lower.
However, it is not possible to join an ETF by providing bitcoins. Rotation from one ETF to another necessarily causes sales of BTC!
Clearly, bitcoin does not appreciate due to incoming flows (~$4 billion) which are offset by outgoing flows (~$2.8 billion) of the GBTC ETF (and BTC that have already been purchased in anticipation of D-Day).
It must be deduced from this that these outgoing funds are not yet reinvested in the new ETFs. They stay in cash. For what ? Perhaps they are waiting in the hope of causing a market reversal in order to buy back at a low price…
For information, Grayscale still holds nearly 89% of BTC (566,900 BTC) now found in ETFs:
GBTC ETF clients are in the driver’s seat
And the fact is that sales from the GBTC ETF are likely to last several weeks since Grayscale has no interest in matching its competitors’ fees.
Indeed, the fund draws juicy fees of 1.5% per year, compared to 0.2% for its competitors. It is therefore more profitable for the fund to do nothing until it has lost X number of clients.
You must solve this simple equation to know from how many BTC lost Grayscale will align its fees with the competition:
1.5%. (619,000 – X) = 0.2%. (X)
<=>
X= 546,176 BTC
-X represents the number of BTC Grayscale can afford to lose before losing money.
-619,000 BTC is the BTC that Grayscale held before the SEC green light for other ETFs.
-1.5% represents the management fees of the Grayscale GBTC ETF
-0.2% represents the management fees of the cheapest ETFs
Said another way, Grayscale makes as much money with a 1.5% fee on 71,824 BTC as it does with a 0.2% fee on 546,176 BTC. It is therefore in his interest to keep his fees at 1.5% until he has lost 88% of his BTC.
Here is a very interesting infographic putting into perspective the quantities of bitcoins held by different institutions:
The remaining BTC is in private hands or lost for good. Hodl! »
In short, and whatever Grayscale’s clients decide to do, BTC/USD will appreciate if the funds flowing into the new ETFs are greater than those flowing out of the GBTC ETF. Which is the case for now.
BTC/USD will rise the faster the former clients of the GBTC ETF rotate quickly.
Hodl!
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.
