According to projections by blockchain analytics company Arkham, Grayscale’s GBTC product is expected to exhaust its entire Bitcoin reserves in 96 days, based on the ongoing rate of redemptions.
At the current rate of redemptions, GBTC runs out of Bitcoin to sell in 96 DAYS.
Since GBTC started trading as an ETF on 11th January, Grayscale has transferred 266.47K BTC out of their wallets for GBTC redemptions.
That’s a rate of 25.9K BTC per week. pic.twitter.com/tMT7T73ena
— Arkham (@ArkhamIntel) March 23, 2024
The report stated that since GBTC transitioned to trading as an ETF on January 11th, Grayscale has moved 266.47K BTC from their wallets to fulfill GBTC redemptions. The redemption rate amounts to 25.9K BTC per week.
At the onset of the year, Grayscale boasted a considerable holding of 618.28K BTC for their Bitcoin Trust GBTC. However, as per Arkham’s estimates, this figure has now dwindled to just 356.44K BTC. The decline in Grayscale’s Bitcoin reserves comes as a notable development, particularly considering Grayscale’s stature as the world’s largest crypto asset manager. This decrease in holdings coincided with the conversion of GBTC into an exchange-traded fund (ETF) around mid-January.
Data from BitMEX underscores the sustained trend of outflows from GBTC, with March 4 marking the 36th consecutive day of such movement. Notably, Cryptonews reported earlier this month that since the conversion of GBTC to an ETF, the cumulative outflow has surged to an impressive $9.26 billion.
One of the primary drivers behind this significant outflow is the introduction of a new feature by Grayscale concurrent with the launch of its spot Bitcoin ETF. This feature permits investors to redeem their shares for Bitcoin, a functionality that was not available previously.
Moreover, it’s worth noting that GBTC imposes higher fees compared to the ETFs offered by other prominent firms such as Blackrock and Fidelity. This disparity in fees likely contributed to the sustained outflow from GBTC.
In response to this trend, Grayscale took proactive steps by filing for a ‘mini’ BTC ETF to mitigate the impact of excessive outflows. The introduction of the mini trust primarily aims to offset losses for existing GBTC holders and investors, as highlighted by the company’s statement.
Hypotheses Associated with GBTC’s Losses
Bloomberg ETF analyst Eric Balchuna suggests that while the worst may seem to have passed for GBTC, uncertainties remain.
What a pounding. Thought worst was over. Guess not. Who is leaving now that wasn’t motivated to leave past two months? https://t.co/YNX1dBt2FM
— Eric Balchunas (@EricBalchunas) March 21, 2024
Eric Balchuna, an ETF analyst at Bloomberg, pointed out that the recent surge in outflows from GBTC is probably more closely associated with recent bankruptcies due to their magnitude and regularity. He elaborated that the flow of funds in February reflected the characteristics typical of retail outflows, which were smaller in scale and lacked a discernible pattern.
Balchuna further remarked, “The worst is probably close to being over. Once it is, only retail will be left, and flows should resemble the trickle seen in February.”
In essence, Balchuna suggests that the peak of the outflow may have been reached, as the current trend appears to reflect the aftermath of significant events such as bankruptcies. He anticipates that as the situation stabilizes, the remaining outflows will likely be driven by retail investors, resulting in a more subdued and sporadic pattern akin to what was observed in February.
