Grayscale appears to be dumping Bitcoin worth billions of dollars and it is likely due to the ETFs that have been recently launched.
The past week saw Bitcoin take a hard hit, as the largest crypto in the market declined by 14%, even though the SEC had given the historical approval of spot bitcoin exchange-traded funds (ETFs).
It seems that one of the reasons for the decline just might be Grayscale, the digital asset manager owned by Digital Currency Group (DCG), the crypto behemoth.
The exit
After the SEC’s approval, the Grayscale Bitcoin Trust (GBTC) was converted into a spot Bitcoin ETF and this has seen investors exit their positions in droves.
The size of the sell-off has left analysts shocked. It was only a week earlier that Grayscale’s Bitcoin ETF had begun trading, along with 10 others that the SEC had approved.
Before that, the GBTC had actually been a closed-end fund where investors had been unable to redeem their shares for Bitcoin.
Now that it has been converted into an ETF, investors have decided to cash out on their investment big time.
In the first few days, almost half a billion dollars had been cashed out. Within a period of five days, a total of $2.2 billion had been cashed out by investors.
The ETFs
Meanwhile, all other ETFs in the market have recorded inflows. The current winner is the BlackRock iShares Bitcoin Trust (IBIT), which has seen inflows of almost $1.2 billion.
A senior ETF analyst at Bloomberg said that GBTC experiencing such massive outflows had come as a shock.
To put it simply, the reason for the outflows is because traders are now exiting their positions in order to get the gains, which they had been unable to do because they were locked in to the fund.
Moreover, as compared to the other ETFs that have been launched in the market, GBTC also seems to have the highest fee at 1.5%.
BlackRock’s IBIT is charging a fee of 0.12%, which will be increased to 0.25% in a period of 12 months. According to industry observers, it is another reason why investors may have decided to cash out.
The impact
Since investors are cashing out, this has prompted Grayscale to move large amounts of Bitcoin to its custodian, Coinbase.
The purpose of shifting the tokens to the American crypto exchange is to sell them in the market, which is leading to a decline in the price of the crypto.
Arkham Intelligence shared on-chain data showing that almost $500 million was shifted by Grayscale to Coinbase in just a period of six hours.
James Butterfill, the head of research at European asset manager CoinShares, said that the outflows from Grayscale likely explain the decline in Bitcoin.
He added that further price declines would depend on when GBTC investors stop selling and also acknowledged that the fee of the ETF is significantly higher than its competition.
Despite the outflows, Grayscale has asserted that the sheer trading volume means that the fund is a success.