Since the conversion of Grayscale's Bitcoin Trust (GBTC) into an exchange-traded fund (ETF) on 11 January, a substantial shift in its Bitcoin holdings has taken place. This article provides a chronological breakdown of key events, shedding light on the notable outflows and their impact on the cryptocurrency market.
On 11 January, Grayscale underwent a significant transformation when its GBTC transitioned into an ETF. Prior to this date, investors in the fund were unable to redeem their shares for Bitcoin or a cash equivalent. However, following the transition, authorised participants gained the ability to buy shares from investors and redeem them for the cash equivalent of the Bitcoin represented by these shares.
As a part of this redemption process, the trust is obligated to sell off Bitcoin to fulfil the cash payments to the redeeming participants. This typically occurs when the price of GBTC is lower than the value of the Bitcoin it holds.
Since the introduction of spot Bitcoin ETFs on 11 January, Grayscale has been actively managing redemptions. Notably, Grayscale transferred a substantial amount of Bitcoin, nearly 113,000 BTC, from its wallet. The majority of these transfers, totaling 16,712 BTC valued at over $726 million, were directed to Coinbase Prime in preparation for sale. This move coincides with the surge in redemptions by GBTC investors who gained the ability to redeem their shares starting from 11 January.
On 12 January, GBTC transferred $41 million to a Coinbase Prime wallet, hinting at potential BTC sales. Traders speculated that this outflow might have contributed to Bitcoin's sharp price decline. Bloomberg analyst Eric Balchunas reported $95.1 million outflows on 11 January and $484.1 million on 12 January, according to Bloomberg Terminal data.
The Grayscale Bitcoin Trust (GBTC) transferred 8,730 Bitcoin, valued at over $376 million, to Coinbase Prime deposit addresses, as reported by blockchain analytics platform Arkham Intelligence. This significant movement of funds occurred by 7:17 pm UTC on that day. The data suggests a notable outflow from the GBTC.
Outflows from the Grayscale Bitcoin Trust on 16 January. (Source: Arkham Intelligence)
On Wednesday morning, the Grayscale website reported a decrease in Bitcoin holdings within its Grayscale Bitcoin Trust (GBTC), down approximately 100,000 BTC since January 11. The total holdings were around 537,000 bitcoins. Analysts, including Arkham, highlighted that the observed movement may not solely be attributed to redemptions. Notably, the outflows are reportedly divided between Coinbase Prime and new GBTC custody addresses, suggesting that some of the Bitcoin transfers could be settlements related to trading activities from previous days. The situation prompts further scrutiny into the dynamics of Bitcoin movements within the Grayscale ecosystem.
The rapid pace of Bitcoin outflows from GBTC, accelerated by the fund's management fee cut and the conversion to an ETF, has exerted considerable pressure on Bitcoin's price. Assets under management at Grayscale have seen a significant daily decline, reaching over $1 billion each day. The market continues to closely monitor GBTC's movements as Bitcoin strives to stabilise around $39,800.
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