- Grayscale transferred $200 million in Bitcoin to Coinbase Prime, hinting at possible redemption activity from its trust after spot Bitcoin ETFs launched
- ETF share creation involves depositing Bitcoin into the trust, while redemption involves withdrawing Bitcoin to give to Authorized Participants
- Day one ETF inflows totaled $720 million, but unclear how much was offset by Grayscale outflows; more data needed on net impact on Bitcoin price
Grayscale recently transferred 4000 BTC (around $200 million) to Coinbase Prime, hinting at possible Bitcoin ETF redemption activity. This comes after the launch of several spot Bitcoin ETFs on January 11, 2023. The timing and nature of the transfer suggests it could be related to redemptions from Grayscale’s trust.
Grayscale’s Bitcoin Transfer to Coinbase Prime
On January 12, Grayscale began moving Bitcoin from its trust to Coinbase Prime. All the Bitcoin went to Coinbase Prime, which acts as the broker and trading counterparty for almost all ETF issuers, including Grayscale.
The last major outflows from Grayscale were around 2 weeks ago when there were multiple transactions in and out of the trust’s Bitcoin wallets.
This transfer of Bitcoin from the trust aligns with the creation and redemption processes for ETF shares, suggesting perhaps just $200 million in redemptions was deemed necessary by Grayscale following the first day of ETF trading. However, this is speculative.
ETF Creation and Redemption Mechanics
The new spot Bitcoin ETFs do not require issuers to buy and sell Bitcoin live during trading hours. Buying and selling mainly happens during creation and redemption of ETF shares.
For creation of shares, Authorized Participants place orders by 3:59 pm NY time, then the Bitcoin is transferred into the Trust’s vault balance.
For redemption, Authorized Participants place orders by 3:59 pm NY time, then the Bitcoin is delivered from the Custodian to the Liquidity Provider.
These transactions could potentially impact the Bitcoin price, depending on factors like order size.
Day One ETF Flows
BlackRock saw $112 million in inflows on day one. Bloomberg estimates around $720 million entered Bitcoin ETFs on day one.
However, it is unclear how much of this was offset by selling out of Grayscale’s trust, which has the highest fees. More analysis is needed to determine the net impact.
Conclusion
Grayscale’s transfer of 4000 BTC to Coinbase Prime aligns with redemption activity, suggesting possible outflows after the launch of spot Bitcoin ETFs. This highlights the mechanics behind ETF share creation and redemption. More data is needed to analyze the net flows into Bitcoin from ETFs and Grayscale.
