- Grayscale Bitcoin Trust (GBTC) converted to an ETF on January 11th, forcing it to sell Bitcoin when shares are redeemed, adding selling pressure
- GBTC has had significant outflows lately, selling $41M and $376M worth of Bitcoin on January 12th and 16th respectively
- GBTC’s higher 1.5% management fee compared to competitors may drive further outflows, but Bitcoin has stabilized despite recent selling pressure
The price of Bitcoin has seen some volatility over the past week. Some analysts have pointed to outflows from the Grayscale Bitcoin Trust as a potential factor weighing on the price. Let’s take a closer look at what’s been happening with the trust and how it could be impacting Bitcoin’s price.
Grayscale Bitcoin Trust Converts to an ETF
The Grayscale Bitcoin Trust (GBTC) is one of the largest holders of Bitcoin in the world. On January 11th, 2023, the trust converted into an exchange-traded fund (ETF). This means that authorized participants can now buy up shares from investors and redeem them for the equivalent value in Bitcoin. When they do this, GBTC is forced to sell some of its Bitcoin holdings.
Recent Outflows and Bitcoin Sales
Data shows that GBTC has had to sell significant amounts of Bitcoin in response to outflows from the fund. On January 12th, GBTC transferred $41 million worth of BTC to Coinbase after its share price declined. Further outflows of $376 million were seen on January 16th.
Some analysts believe these outflows and subsequent sales are weighing on Bitcoin’s price. When GBTC sells BTC, it adds selling pressure in the market. However, Bitcoin’s price has stabilized in recent days despite the outflows.
Criticisms of GBTC’s Fee Structure
Some traders blame the higher fees charged by GBTC relative to competitors for the outflows. GBTC has a 1.5% annual management fee compared to lower fees charged by other Bitcoin ETFs. The higher costs may be incentivizing investors to move their funds elsewhere.
In summary, GBTC has seen significant outflows from its fund since converting to an ETF. This has forced it to sell large amounts of Bitcoin, which some argue has added selling pressure on Bitcoin’s price. However, Bitcoin appears to have found support despite these outflows. Going forward, GBTC’s high fees relative to competitors may continue to drive investors away from the fund.