Grayscale Bitcoin Trust Threatens Bitcoin’s Price with $1.5 Billion Sell-Off, JPMorgan Reveals

• GBTC is reported to have recorded $1.5 billion in outflows with an additional $1.5 billion expected through profit-taking.

• According to the bank, $5 billion to $10 billion could flow out if it loses its liquidity advantage. 

The Bitcoin (BTC) price saw a mini rally soon after the spot Bitcoin Exchange-Traded Funds (ETFs) were approved by the US Securities and Exchange Commission. In a surprising turn of events, the upward surge was strongly resisted by sellers, forcing a U-turn from $47k to its current price of $41,641.67.

According to reports, the asset has lost 15% of its value since the launch of the spot ETFs last week. On top of that, billions of dollars are reported to have moved out of Grayscale’s GBTC. Renowned analyst Nikolaos Panigirtzoglou associated the move with investors’ decision to take profits post-ETF conversion.

While a huge portion of the outflows come from those shifting to cheaper spot Bitcoin ETFs, some are also from investors completely exiting the Bitcoin market.

It looks like GBTC investors who over the past year had been buying the GBTC fund at a significant discount to NAV to position for its eventual ETF conversion, has been taking full profit post-ETF conversion by exiting the bitcoin space entirely rather than shifting to cheaper spot bitcoin ETFs.

Analysts believe that the Bitcoin price could undergo massive pressure in the coming weeks due to the relevance of GBTC in the space. Before its ETF launch, GBTC was the destination for stock traders in the U.S. who needed exposure to Bitcoin without directly getting involved. It then recorded the largest Asset Under Management (AUM). 

GBTC Could Reduce its Fees

To take advantage of its trust’s discount to NAV, up to $3 billion was invested into the secondary market of GBTC in 2023. With the recent report that $1.5 billion has already exited the market, an additional $1.5 billion could follow through profit-taking. According to a report, GBTC could be forced to lower its fees as it stands a chance of another $5 billion to $10 billion loss when it loses its liquidity advantage. 

GBTC fee at 1.5% still looks too high compared to other spot bitcoin ETFs risking further outflows. A lot more capital, perhaps an additional $5 billion-$10 billion, could exit GBTC if it loses its liquidity advantage.

Comparatively, GBTC is more expensive than the other ETFS as some even offer zero fee charges. However, the charge-free counterparts could hold that offer until a targeted AUM amount is reached or after some time. 

According to JPMorgan, other ETFs apart from GBTC recorded $3 billion in inflows in just four days. Also, $1.9 billion was poured into the nine new ETFs in just three days. Interestingly, BlackRock and Fidelity had the lion’s share. This collective flow was reported to have outshined that of ProShares Bitcoin Strategy ETF. After the 2021 launch, it had $1.2 billion in inflows in three days. SPDR Gold Shares ETF launched in 2004 also attracted $1.13 billion in the first three days of trading. 

Bitcoin has surged by 1% in the last 24 hours. However, it has declined by 3.3% in the last seven days with a neutral market sentiment.