Why does Grayscale GBTC continue to outflow?

GBTC funds continue to outflow

On January 19, 2024, data showed that the asset management scale of Fidelity Bitcoin Spot ETF (FBTC) exceeded US$1 billion, reaching US$1.016 billion. In addition, the total outflow of Grayscale GBTC funds in the past five days exceeded US$2.2 billion.

On January 23, 2024, the number of bitcoins held by Grayscale was 552,681.2268, the asset management scale was US$22,175,195,701.96, and the outstanding shares were 618,310,100. The number of bitcoins held by Grayscale decreased by another 14,292.1783 BTC compared to January 20, and the asset management scale decreased by more than US$1.36 billion.

According to data on January 24, 2024, the total net outflow of Bitcoin spot ETFs was US$105 million on that day, of which the Grayscale Bitcoin Trust ETF had a net outflow of US$515 million in a single day. In addition to Grayscale, other ETFs had a total net inflow of US$410 million.

That night, Grayscale transferred another 19,200 BTC to the Coinbase Prime recharge address, worth US$810 million.

The former king: Grayscale and GBTC

Grayscale is an American company founded in 2013 that focuses on providing digital asset management services to institutional investors. Grayscale has 14 cryptocurrency investment products, including Bitcoin, Ethereum, Litecoin, Stellar, etc.

Grayscale's investment products are all trust funds, that is, investors give their money to Grayscale, Grayscale purchases and holds cryptocurrencies on behalf of investors, and then issues shares to investors to represent their shares in the trust fund.

Grayscale's founder is Barry Silbert, a well-known figure in the digital currency field and the founder and CEO of Digital Currency Group, a global investment company focused on investing in and incubating companies related to digital currency and blockchain technology.

Grayscale's goal is to enable traditional investors to participate in the digital currency market in a safe, compliant and transparent manner and enjoy the potential benefits and diversification of digital currencies. Grayscale's investment products have been registered and regulated by the U.S. Securities and Exchange Commission (SEC) and comply with U.S. laws and regulations.

GBTC is the abbreviation of Grayscale Bitcoin Trust, which is Grayscale’s most popular investment product and the world’s largest Bitcoin trust fund.

The goal of GBTC is to allow investors to participate in the Bitcoin market in the form of stocks without having to directly purchase, store and protect Bitcoin.

GBTC's share price is correlated to the amount and market value of Bitcoin it holds, but often trades at high premiums or discounts.

GBTC was originally a private trust that was only open to qualified investors. Qualified investors refer to investors with certain financial qualifications and risk tolerance who can participate in some investment opportunities that are not open to ordinary investors.

Later, GBTC obtained approval from the U.S. Financial Industry Regulatory Authority (FINRA) and became a publicly traded trust. Any investor can buy and sell GBTC shares on the over-the-counter (OTC) market.

In January 2020, GBTC became the first digital currency investment product to report to the SEC, which means that GBTC shares have been officially registered and regulated by the SEC.

It can be said that GBTC provides investors with a convenient, safe and compliant way to share the growth potential and innovative value of Bitcoin. GBTC has also made important contributions to the popularization and recognition of Bitcoin.

What is the reason for the continued outflow?

As mentioned above, GBTC is a digital currency investment product that allows investors to participate in the Bitcoin market in the form of stocks without having to directly purchase, store and protect Bitcoin.

GBTC's share price is correlated to the amount and market value of Bitcoin it holds, but often trades at high premiums or discounts.

A premium means that GBTC's share price is higher than the value of Bitcoin per share it holds, and a discount means that GBTC's share price is lower than the value of Bitcoin per share it holds.

GBTC has been experiencing outflows recently, mainly due to the launch of Bitcoin spot exchange-traded funds (ETFs) in the U.S. market. These ETFs have lower fees and higher liquidity, attracting many investors to switch from GBTC to ETFs.

An ETF is an investment product that tracks an index or asset and can be bought and sold on an exchange, just like a stock. A Bitcoin spot ETF is an ETF that directly holds Bitcoin, and its price is consistent with the Bitcoin market price, without any premium or discount.

The outflow of GBTC has put negative pressure on the price of Bitcoin, and there are several possible reasons for the outflow:

GBTC investors want to switch to a cheaper and more flexible Bitcoin spot ETF.

GBTC's annual fee is 1.5%, while the annual fee of Bitcoin spot ETF is only 0.2%, or lower.

GBTC investors also need to wait for a six-month lock-up period before they can sell their shares, while the Bitcoin spot ETF has no such restriction.

Investors in GBTC may also want to avoid the risk of a premium or discount on GBTC, as the difference between the GBTC share price and the market value of Bitcoin can be large, while the difference between the price of a Bitcoin spot ETF and the market price of Bitcoin is small.

GBTC investors want to take profits, or reduce their exposure to Bitcoin.

GBTC investors may have bought GBTC when the price of Bitcoin was high, and then sold GBTC when the price of Bitcoin fell, thereby realizing profit.

GBTC investors may also want to move funds to other investment opportunities, thereby reducing their exposure to Bitcoin.

GBTC investors were influenced by other factors that led them to sell GBTC.

GBTC investors may have been affected by some unfavorable news or events, such as U.S. regulation of cryptocurrencies, the development of Bitcoin's competitors, etc., or investors may have sold GBTC because they wanted to reduce risks.

GBTC investors may also be affected by some technical factors, such as GBTC's trading volume, GBTC's market value, GBTC's liquidity, etc., which may affect their trading decisions or force them to sell GBTC.

In short, the outflow of GBTC is a complex phenomenon involving multiple factors. The outflow of GBTC has a certain impact on the price and market of Bitcoin, but it is not a decisive factor.

Summarize

GBTC is the abbreviation of Grayscale Bitcoin Trust, which is a digital currency investment product that allows investors to participate in the Bitcoin market in the form of stocks.

GBTC was once a major driving force behind Bitcoin and is the world's largest Bitcoin trust fund.

However, since the Bitcoin spot ETF started trading, GBTC has begun to experience a large outflow of funds, resulting in a significant reduction in the number of Bitcoins it holds and the scale of assets under management.

The main reason for the outflow of GBTC funds is that more Bitcoin spot ETFs have been launched in the US market, which have lower fees, higher liquidity, no premium or discount issues, and no lock-up period restrictions. Therefore, many investors choose to switch from GBTC to ETFs to obtain better investment results.

It can be said that the outflow of GBTC funds has caused negative pressure on the price and market of Bitcoin, but it has also been affected by other factors, such as US regulation, Bitcoin's competitors, etc.