Grayscale Bitcoin Trust Withdrawals Reach Record Low

Grayscale Bitcoin Trust Withdrawals Reach Record Low

This week saw the withdrawals from Grayscale Bitcoin Trust reach their lowest daily level on Wednesday, after the conversion of the fund into a spot Bitcoin ETF back in January.

It resulted in optimism that the fund would halt the sales of substantial amounts of Bitcoin due to the withdrawals.

The decline

BTC worth $17.5 million was sold by the investors in the ETF on Wednesday, as opposed to the $150 million per day that had been sold in the three days prior.

Due to this sudden slowdown, there was a lot of excitement on Crypto Twitter, as there was speculation that Grayscale did not have anything left to give.

Therefore, it could relieve a major source of pressure on the broader Bitcoin market. In the three months since the conversion of GBTC into an ETF, it has lost about 300,000 BTC.

This is about half of the total holdings the fund had back in January. It is despite a rise of 58% in the price of Bitcoin this year and continuous inflows to rival funds run by Fidelity and BlackRock.

The outflows

It is important to note that many of the outflows that have been recorded by Grayscale seem to stem from the bankruptcy estates of Genesis and FTX.

The two companies had been approved to liquidate their collective GBTC holdings of about $2 billion in the last few months.

According to data from Arkham, Genesis had liquidated its shares worth $2.1 billion, or 32,000 BTC tokens back in March.

Another factor is the management fee, as Grayscale is charging 1.5% from its investors per year, while the iShares Bitcoin Trust (IBIT) is charging 0.25%.

This gives little incentive to prospective Bitcoin buyers to purchase GBTC rather than other funds and also sways current investors to switch to other providers.

The analysis

However, on-chain data shows that the outflows recorded from Grayscale are not a temporary anomaly. The phenomenon is completely natural, also seen in past bull markets.

James Check, a Glassnode analyst, said that GBTC was working in the same way as HODLer selling. He said that it was in the summer of 2021 when the fund had purchased most of its tokens.

He stated that those who bought them have now earned huge profits and have naturally opted to cash out. This is something that long-term holders typically do when Bitcoin surpasses its previous all-time high.

He asserted that it did not matter who the coins belonged to, whether they were arbitrage traders, disgruntled holders, or bankrupt estates.

Even though Grayscale had started with a lead of almost $30 billion over its competitors, BlackRock’s iShares Bitcoin Trust is catching up to it fast.

Data shows that there is now just a gap of $4 billion between the two spot Bitcoin ETFs and many believe that BlackRock will surpass it quickly.

This is likely to happen if the outflows from Grayscale pick up once more and BlackRock continues to record inflows.