- Grayscale’s Bitcoin Trust (GBTC) has seen $7 billion in outflows since converting to a spot Bitcoin ETF in January, but the rate of outflows has slowed down considerably.
- Much of the outflow is attributed to investors rebalancing portfolios and moving to spot Bitcoin ETFs with lower fees than Grayscale’s 150 bps.
- Outflows are also from closing arbitrage trades, as GBTC traded at a steep discount before converting to an ETF. Further declines are expected, but Grayscale remains the largest Bitcoin fund.
Grayscale’s spot Bitcoin exchange-traded fund (ETF) continues to see outflows from its Grayscale Bitcoin Trust (GBTC), but the rate of outflows has slowed down considerably since converting to an ETF in January.
Outflows Reach $7B But Are Slowing
According to a recent report from Farside, the outflow from GBTC since converting to a spot Bitcoin ETF has reached $7 billion as of Feb. 16. However, while January saw the largest portion of the exodus, with $5.64 billion leaving GBTC by the end of the month, February has only seen $1.37 billion in outflows so far.
Investors Rebalancing Portfolios
Bianco Research founder Jim Bianco believes much of the outflow is due to investors rebalancing their portfolios and shifting to spot Bitcoin ETFs with lower fees. The newly launched ETFs have cut their fees to 0-12 basis points, whereas Grayscale still charges 150 bps.
Closing the GBTC Discount Arbitrage
Bianco offered another reason for the continued GBTC outflow – the fund traded at a substantial discount to the BTC market price (a roughly 44% discount to Bitcoin) when BlackRock filed for its spot ETF in June 2022. When it [Grayscale] converted to an ETF on January 11, 2023, they began to close this arbitrage-type trade as their goals were accomplished.”
Outflow Likely to Continue
Meanwhile, ETF Store President Nate Geraci believes it’s still early and that the asset bleed will continue. “They can have assets chopped by like 90% and still make more than all of the other issuers combined,” he said.
Geraci also believes Grayscale may next launch a mini-GBTC, a separate spot Bitcoin ETF at a significantly lower fee.
Conclusion
While GBTC outflows have slowed down, they still total $7 billion so far and observers believe there is room for further declines. The bleeding stems from investors closing arbitrage trades after conversion to a spot ETF and portfolio rebalancing. However, even with major outflows, Grayscale remains the largest Bitcoin fund with over $23 billion in assets under management.
