GBTC ETF Loses Billions as Bitcoin Struggles to Recover

The Grayscale Bitcoin Trust (GBTC), the largest and oldest spot Bitcoin ETF in the US, has seen massive outflows of funds since its conversion earlier this month. Meanwhile, Bitcoin price remains below $40,000, erasing most of its gains since the ETF approval.

GBTC Outflows Reach $3.4 Billion

According to data from Bloomberg ETF analyst James Seyffart, GBTC reported another $515 million in outflows on January 23, taking the total outflows to $3.4 billion since its conversion to spot ETF on January 10. This means that investors have withdrawn more than 10% of GBTC’s assets under management (AUM) in less than two weeks.

The surge in outflows from GBTC is linked to the activities of the now-defunct FTX crypto exchange, which purportedly offloaded approximately two-thirds of its 22.3 million GBTC shares during a three-day trading span. FTX reportedly retains approximately 8 million shares, equivalent to about $281 million in value, yet to be liquidated.

GBTC was the first and largest Bitcoin investment product in the US, launched in 2013 as a closed-end fund that traded at a premium to its net asset value (NAV). However, since the US Securities and Exchange Commission (SEC) approved the first spot Bitcoin ETFs in October 2023, GBTC has faced increased competition and pressure from investors to convert to an ETF.

On January 10, 2024, GBTC completed its conversion to a spot Bitcoin ETF, allowing investors to redeem their shares for Bitcoin at NAV. However, this also triggered a wave of selling as some investors opted to exit the fund and switch to other ETFs or Bitcoin platforms.

Other Bitcoin ETFs See Mixed Results

While GBTC has suffered from massive outflows, other Bitcoin ETFs have seen mixed results in terms of inflows and performance. According to Seyffart, nine other recently approved spot Bitcoin ETFs recorded a total of $249 million in inflows on January 23. However, this was not enough to offset the outflows from GBTC, resulting in a net outflow of $266 million for the day.

Among the nine new Bitcoin ETFs, the most popular ones are the ProShares Bitcoin Strategy ETF (BITO) and the VanEck Bitcoin Trust (VBTC), which have attracted $1.6 billion and $1.2 billion in AUM respectively. However, both funds have also seen significant declines in their NAVs since their launch, as Bitcoin price has dropped from over $60,000 to below $40,000.

The other seven Bitcoin ETFs have much smaller AUMs, ranging from $16 million to $262 million. Some of these funds have also seen outflows in recent days, indicating that investors are not satisfied with their performance or fees.

Bitcoin Price Remains Below $40,000

The launch of spot Bitcoin ETFs in the US was widely expected to boost the demand and price of Bitcoin, as it would provide easier and cheaper access to the cryptocurrency for retail and institutional investors. However, the opposite has happened, as Bitcoin has lost nearly $200 billion in market capitalization since the ETF approval.

At the time of writing, Bitcoin is trading at $39,700, down 2.3% in the last 24 hours and 32% in the last month. The cryptocurrency has failed to sustain above $40,000, despite several attempts to break the resistance level.

Some analysts have attributed the Bitcoin price slump to various factors, such as regulatory uncertainty, market manipulation, profit-taking, and macroeconomic headwinds. However, others have argued that the ETF approval was already priced in by the market, and that the conversion of GBTC to an ETF has actually reduced the demand for Bitcoin, as investors can now redeem their shares for Bitcoin instead of buying more.

As bearish sentiment appears to be prevailing, the next crucial price levels for Bitcoin that could provide support are estimated to be between $38,000 and $36,000, according to Bitfinex analyst Paolo Ardoino. If Bitcoin fails to hold above these levels, a further price correction could be expected.