Despite the fanfare launch of ETFs, bitcoin collapsed towards $42,000. For what ?
At issue: the GBTC Trust
Grayscale launched the very first publicly traded bitcoin fund in the United States in 2013. This Trust named GBTC (Grayscale Bitcoin) is traded on the OTCQX market.
Grayscale had been approaching the SEC for several years to transform its Trust into an ETF, without success. Everything changed on August 29, 2023, when the District of Columbia Court of Appeal ruled in his favor.
This verdict was the second important milestone towards the validation of ETFs after the entry of BlackRock two months earlier. The SEC finally validated all ETFs at once on January 10.
However, Gary Gensler seemed to be teasing. The SEC chairman knew that GBTC clients would move to ETFs that offer eight times lower management fees.
However, the SEC insisted that all transactions to and from ETFs must be done “in cash”, and not “in-kind”. So customers leaving GBTC cannot simply transfer their bitcoins to the new ETFs. First they have to sell everything for dollars.
In other words, the transition from trust to ETFs mechanically triggers a dump of bitcoins on the market. Hence the downward pressure…
GBTC is 600,000 bitcoins…
In two days, nearly 30,000 bitcoins were swallowed up by the 10 ETFs. That’s about $1.4 billion. Subtracting the net outflows from the GBTC Trust ($579 million, the equivalent of 14,000 bitcoins), we get net inflows of +$821 million.
But then why is bitcoin falling if we have such large net inflows despite the GBTC fund sales?
Because the ETF managers were already holding bitcoins in anticipation of the big day. It is therefore likely that they did not have to buy $821 million worth of bitcoin. It is therefore the sales of the GBTC Trust which have the greatest impact on the market in the short term.
Another factor to consider is that several major US banks do not let their clients invest in ETFs. These include Citi, Bank of America Merrill Lynch, Edward Jones, UBS, etc. A certain number of Trust GBTC customers cannot yet carry out their rotation.
Regardless, a total of 11,500 BTC is what BlackRock has already had to put in reserve to satisfy demand. That’s about 1/3 of the cake. Fidelity (FITB) and Bitwise (BITB) complete the podium:
Overall, ETFs swallowed more than 30,000 bitcoins in just two days. This equates to almost 33 days of BTC production. This will even represent 66 days of production after the “halving”.
At this rate, the 1.8 million BTC present on the exchanges will be exhausted by next July. Knowing that they don’t all sell.
Patience, the green candle is coming.
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