The Grayscale Bitcoin Trust (GBTC) has experienced substantial outflows in its initial days as a spot Bitcoin exchange-traded fund (ETF), resulting in a significant decrease of almost $5 billion in assets under management (AUM). Data from YChart and Grayscale reveals a drop in the ETF’s total assets from $28.5 billion on January 10 to $23.7 billion on January 18.
The decline in Bitcoin’s price has also contributed to the reduction in AUM. As the underlying asset of the ETF, Bitcoin’s market value directly impacts the fund’s overall value. At present, Bitcoin’s price has decreased by 4% in the past week, trading at $40,582, according to Cointelegraph data.
Anticipated outflows from GBTC followed the approval of the ETF by the Securities and Exchange Commission on January 10. This approval enabled GBTC holders to convert and redeem their shares for Bitcoin, eliminating the need to sell shares on the secondary market to exit positions. Over a three-day period, approximately $1.1 billion flowed out of Grayscale’s ETF as investors sought lower fees from competing options and took advantage of a narrow discount on shares.
SkyBridge Capital founder Anthony Scaramucci noted that certain GBTC investors were realizing losses and shifting to more cost-effective ETF alternatives. To illustrate the fee disparity, GBTC carries a 1.5% fee, while other ETFs offer fees as low as 0.20%, along with six months of free investing.
Dave Weisberger, the CEO of CoinRoutes, highlighted the role of GBTC holders’ composition in the surge of outflows. Alongside hedgers seeking discounts and other investors moving to lower fees, panic selling may be contributing to recent market movements. Weisberger emphasized the significance of taxable accounts either taking profits or panic selling to preserve them, noting the uncertainty regarding the percentage of such actions and the average entry price for the holders.
While GBTC grapples with challenges as a spot ETF, other Bitcoin funds are witnessing a different trend. On the fifth trading day, issuers added a net 10,667 BTC to their portfolios amid increased activity. According to CC15Capital data, there has been a net addition of approximately $440 million in Bitcoin holdings by issuers. A significant portion of this increase is attributed to BlackRock’s ETF, which acquired about 8,700 BTC, valued at nearly $358 million. Collectively, nine ETFs (excluding Grayscale) have purchased close to 68,500 BTC since their inception.