Why does grayscale GBTC continue to flow out?

Source: W3C DAO

GBTC funds continue to flow out

January 19, 2024 , data shows 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 it held was 552,681.2268, the asset management scale was US$22,175,195,701.96, and the circulating shares were 618,310,100. The number of Bitcoins held by Grayscale has decreased by 14,292.1783 BTC compared with January 20, and the asset management scale has decreased by more than 1.36 billion US dollars.

On January 24, 2024, according to data, the total net outflow of Bitcoin spot ETFs on that day was US$105 million, of which the Grayscale Bitcoin Trust ETF had a single-day net outflow There was an outflow of US$515 million, and other ETFs except Grayscale had a total net inflow of US$410 million.

That night, Grayscale once again transferred 19,200 BTC to the Coinbase Prime deposit address, worth $810 million.

The former king: Grayscale and GBTC

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

Hayscale’s investment products are all trust funds, that is to say, investors give money to Grayscale, and Grayscale purchases and keeps cryptocurrencies on behalf of investors, and then invests Investors issue shares representing their share of the trust fund.

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

The goal of Grayscale is to enable traditional investors to Participate in the digital currency market in a regulated and transparent manner and enjoy the potential benefits and diversification of digital currency. 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. It is Grayscale’s most popular investment product and the largest Bitcoin trust fund in the world.

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

GBTC’s share price is related to the number of Bitcoins it holds and its market value, but there are often high premiums or discounts.

GBTC was originally a private trust and 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 was approved by the US Financial Industry Regulatory Authority (FINRA) and became a publicly traded trust. Any investor can buy and sell GBTC on the over-the-counter market (OTC). of shares.

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 popularity 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 through stocks. There is no need to buy, store and secure Bitcoin directly.

GBTC’s share price is related to the number of Bitcoins it holds and its market value, but there are often high premiums or discounts.

Premium means that GBTC’s stock price is higher than the value of the Bitcoins it holds per share, and discount means that GBTC’s stock price is lower than the value of the Bitcoins it holds per share.

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

ETF is an investment product that tracks an index or asset and can be bought and sold on an exchange, just like stocks. Bitcoin spot ETF is an ETF that directly holds Bitcoin. Its price is consistent with the Bitcoin market price, and there will be no 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:

Investors in GBTC want to exchange for cheaper, A more flexible Bitcoin spot ETF.

The annual fee for GBTC is 1.5%, while the annual fee for Bitcoin Spot ETF is only 0.2%, or lower.

GBTC investors also need to wait for a 6-month lock-up period before selling their shares, while the Bitcoin Spot ETF does not have this restriction.

GBTC investors may also want to avoid the risk of a premium or discount on GBTC due to GBTC’s share price and Bitcoin’s market value The difference between the price of a Bitcoin spot ETF and the market price of Bitcoin can be very small.

GBTC investors want to take profits or reduce their investment in Bitcoin.

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

GBTC investors may also want to transfer funds to other investment opportunities, so they reduce their investment in Bitcoin.

GBTC investors were affected by other factors, causing them to sell GBTC.

GBTC investors may have been affected by some adverse news or events, such as the United States’ regulation of cryptocurrencies and the impact of Bitcoin’s competitors. development, etc., or investors wanted to reduce risks, so they sold GBTC.

GBTC investors may also be affected by some technical factors, such as GBTC trading volume, GBTC market value, GBTC liquidity, etc., which affects their trading decisions, or is Forced to sell GBTC.

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

Summary

GBTC is the abbreviation of Grayscale Bitcoin Trust and is a Digital currency investment products that allow investors to participate in the Bitcoin market through stocks.

GBTC was once an important driving force of Bitcoin and the largest Bitcoin trust fund in the world.

However, since the Bitcoin spot ETF opened for trading, GBTC has begun to experience large outflows of funds, resulting in a significant reduction in the number of Bitcoins it holds and the size of its assets under management.

The main reason for the outflow of GBTC funds is the launch of more Bitcoin spot ETFs in the US market. These ETFs have lower fees, higher liquidity, and no premium or discount issues. There is no lock-in period limit. Therefore, many investors choose to switch from GBTC to ETFs for 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 competitors, etc.