Grayscale Bitcoin ETF Experiences Record Outflows Amid Market Drop

The recent downturn in Bitcoin's value has seen a significant selloff, with an inrush of record outflows from Grayscale's Bitcoin Trust since its shift to an exchange-traded fund (ETF) early this year. The disturbances in the crypto market intensified this turbulence.

Historic Outflows on Grayscale ETF

Grayscale, a leading digital currency investment firm, observed a historic outflow from its Bitcoin ETF, reaching a new high of $642.5 million on Monday. These figures come from BitMEX Research just as Bitcoin's value dipped by 4%. The downtrend continued with an additional 2% drop by Tuesday afternoon, as data awaited release the following morning for Tuesday's outflows.

Sequential Losses Since ETF Conversion

Investors have been pulling their investments from Grayscale's fund since its conversion to an ETF on January 10. This exodus contrasts with the influx of capital into new spot bitcoin ETFs, approved on the same day by the United States Securities and Exchange Commission (SEC). Post-conversion, the Grayscale ETF has seen total outflows approximating $12 billion, despite a 52% spike in Bitcoin's price, which has moderated these outflows. Currently, the fund stands at $27.2 billion, down from its peak.

Reactions and Adjustments

Todd Rosenbluth, who heads research at market analysis firm VettaFi, explains that the significant size and cost of Grayscale's bitcoin ETF naturally leads to profit-taking and redemptions. On the other hand, Grayscale has not provided comments immediately but its CEO, Michael Sonnenshein, hinted at outflows expected due to arbitrage-related sales.

Additionally, Grayscale's CEO disclosed plans for a future reduction in the fund's fees in response to competitive pressures. The current fee stands at 1.5%, markedly above the maximum fee of 0.25% charged by rivals, with occasional waivers reducing it further.

Market Impact and Investor Behavior

The broader Bitcoin fund market experienced subdued activity, with most other funds reporting minimal inflows or stable assets. This inert investor behavior, combined with the outflow from Grayscale, culminated in the worst day for Bitcoin ETF inflows since late January. Experts suggest that after the rallies, it's common for profit-taking to ensue, and a continuous influx of funds cannot be expected on a daily basis.

Grayscale, Bitcoin, ETF