- Most Grayscale Bitcoin Trust investors remain profitable despite $5 billion in outflows and Bitcoin’s falling price; data shows 70% entered GBTC before its ETF conversion at cost basis 20% below current prices
- Majority of investors are positioned for 33-40% profit; second largest group remains profitable until 39% price drop, representing potential outflow of 230,000 BTC worth $89 billion
- GBTC was 100% profitable at its ETF conversion; continued outflows could see 40% Bitcoin drawdown but impact uncertain as GBTC trades OTC, and institutional demand may limit downside
Grayscale converted its Bitcoin trust (GBTC) into an ETF on January 11, 2023. Since then, it has seen significant outflows totaling around $5 billion. However, data shows that most investors who entered GBTC before its conversion remain profitable despite the outflows and Bitcoin‘s falling price.
The Majority Of Grayscale Investors Purchased Below Current Prices
According to data from Webull, around 70% of GBTC holders likely remain in profit. The average shares were purchased at $27.82 – some 20% below the current price. The Webull data shows that 70% of investors had a cost basis between $18.84 and $27.24.
In terms of shareholder distribution, the largest concentration appears to be positioned between 33% and 40% profits. With Bitcoin at $34,900 at the time of writing, the bottom of this range acts as support amid continued outflows.
The second largest concentration is much lower, between 18% and 21% profits. This group will remain profitable until the GBTC price falls another 39%.
Potential Impacts If Outflows Continue
Should the price fall to the level where the second concentration of investors is barely profitable, representing a further 23% drop, we would witness another 230,000 BTC hit the OTC desks. This is worth around $89 billion with Bitcoin at $39,000.
Such an outflow would leave Grayscale with roughly 350,000 BTC. At a 1.5% management fee, this would still generate approximately $200 million in revenue if Bitcoin stayed around $39,000. This shows the lack of fee pressure on Grayscale despite the outflows.
With so many investors still profitable, Grayscale could potentially see a near-40% Bitcoin drawdown if profit-taking continues. For bears, a 40% BTC drop from current levels would take it to around $23,000.
Most Investors Were Profitable At GBTC’s Conversion
Interestingly, the Webull data suggests that 100% of GBTC shares were profitable when it converted to an ETF on January 10. This is supported by GBTC closing at its highest price in 17 months on its last day as a trust.
Following the FTX collapse, some hoped GBTC outflows would slow down. However, a further 17,000 BTC recently moved to Coinbase Prime from the ETF. Net outflows totaled around 15,000 BTC worth $600 million.
Conclusion
The high number of Grayscale investors still in profit creates potential for further outflows. However, the impact on Bitcoin’s spot price remains uncertain. GBTC trades OTC, so direct price impacts are limited unless liquidity dries up.
Still, with strong institutional demand, the chance to acquire cheaper Bitcoin may limit the downside. It will be interesting to see where the majority of capital flowing out of GBTC ultimately ends up.
