Asset manager Grayscale, known for its Bitcoin Trust (GBTC) fund, is pursuing massive Bitcoin transfers to Coinbase. He has already reportedly sent 13,000 bitcoins valued at around $550 million to addresses linked to the exchange over the past two weeks.
Continued bitcoin transfers to Coinbase
In late December, Grayscale began moving increasing volumes of BTC to wallets associated with Coinbase’s custody services. On January 5, 4,000 bitcoins worth $183 million were moved. Then on January 16, an additional 9,000 bitcoins, valued at $385 million, took the same path.
In total, no less than 13,000 BTC were transferred by Grayscale to Coinbase over a period of two weeks, for a value exceeding $550 million. These gigantic volumes demonstrate continued movements on the part of GBTC fund unit holders. They could reflect a loss of confidence in Grayscale’s investment vehicle, as it attempts to convert into a “spot” ETF.
The GBTC fund facing competition
Switching to an ETF would allow Grayscale to eliminate the discount that currently penalizes GBTC compared to the price of Bitcoin (BTC). But this complex process takes time. Meanwhile, Grayscale faces competition from more competitive Bitcoin ETFs, such as that of ProShares, which has significantly lower management fees than GBTC.
With fees of 1.5%, compared to only 0.65% for the ProShares fund, GBTC appears less attractive for certain investors, hence potentially these significant withdrawal movements. The volumes of assets under management of GBTC have also fallen sharply, going from more than 30 billion dollars to less than 15 billion currently.
This erosion probably reflects a change in allocation on the part of institutional investors. Rather than going through GBTC, many are turning directly to platforms like Coinbase to access Bitcoin. Hence the massive transfers from Grayscale to the wallets of Coinbase, which plays an increasing role as an intermediary for institutional investors. This development highlights the fierce competition between different crypto investment vehicles.
The recent transfers of millions of dollars in bitcoin from Grayscale to Coinbase demonstrate the titanic movements at work in the crypto investment market. They probably reflect a change in allocation on the part of institutional investors, who are abandoning the GBTC fund in favor of more competitive vehicles.
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