Grayscale‘s Bitcoin Trust withdrawals hit a new low on Wednesday. This has led to speculation that selling pressure on Bitcoin may ease up. But is the slowdown just temporary? Let’s take a look at what’s driving withdrawals and how they could impact Bitcoin price action going forward.
What’s Behind the Sudden Slowdown in Outflows?
On Wednesday, the Grayscale Bitcoin Trust saw withdrawals of just $175 million worth of BTC, compared to over $150 million per day in the prior week. This sudden change has some thinking the fund won’t have much left to sell soon.
The thinking is that with less left to liquidate, Grayscale won’t create as much selling pressure on Bitcoin. The fund has already lost over 300,000 BTC since converting to a spot ETF in January. That’s nearly half its holdings despite inflows to competitors like BlackRock and Fidelity.
Some outflows stem from FTX and Genesis bankruptcy estates liquidating holdings. Data shows Genesis alone sold over 32,000 BTC worth $2.1 billion in March.
Management fees also incentivize outflows. Grayscale charges 1.5% annually versus just 0.25% for BlackRock’s Bitcoin ETF. So investors have reason to switch to competitors.
Are Outflows Just Part of the Bitcoin Cycle?
According to on-chain analysis, Grayscale’s outflows aren’t an anomaly. They follow patterns seen in previous Bitcoin bull markets.
As Glassnode’s James Check explained, most of Grayscale’s coins entered the fund in 2021. Those buyers are now taking profits as Bitcoin breaks all-time highs. This is typical behavior for long-term holders.
Check argues it’s irrelevant whether the selling comes from bankruptcy estates, arbitrage traders, or others. The takeaway is every Bitcoin sold by Grayscale must get absorbed by new buyers.
So far, new demand has kept pace with outflows. But some think equilibrium is coming as the gap between Grayscale and competitors shrinks.
Conclusion
In the end, Grayscale outflows appear largely driven by natural profit-taking. While they may not vanish overnight, data suggests the extreme pace of withdrawals has slowed. For now, new buyers seem willing to absorb those coins. So the impact on Bitcoin price action could remain limited going forward.
