Grayscale’s ETF Sees Lowest Bitcoin Withdrawals

Grayscale Bitcoin Trust, now operating as a spot Bitcoin ETF, reported its lowest daily withdrawal level on Wednesday since its transition in January. This marked decrease to just $17.5 million worth of BTC sold, compared to the high rates of over $150 million in the preceding days, has ignited optimism among investors and observers.

The ETF’s dramatic reduction in outflows arrives three months after its conversion, during which it lost nearly half of its initial holdings—over 300,000 BTC. This considerable shrinkage occurs despite the robust inflows seen by rival funds like those managed by BlackRock and Fidelity, and against the backdrop of a Bitcoin price surge of 58% this year.

The sources of these significant outflows have been pinpointed primarily to the bankruptcy estates of FTX and Genesis. Both entities were authorized to liquidate substantial GBTC holdings, totaling more than $2 billion. Arkham data reveals that in March alone, Genesis liquidated holdings equivalent to over 32,000 BTC ($2.1 billion).

Another contributing factor to the reduced attractiveness of GBTC compared to its competitors is its higher management fees. Grayscale charges a 1.5% annual fee, starkly higher than the 0.25% charged by the iShares Bitcoin Trust (IBIT). This fee disparity may be influencing both prospective and existing investors to consider other options.

Despite these outflows, on-chain analysis indicates that such movements are not anomalous but rather typical of behaviors seen in previous Bitcoin bull markets. James Check, a lead analyst at Glassnode, described the outflows as akin to typical HODLer behavior—investors taking profits after significant price increases.

Check’s analysis underscores that regardless of whether the withdrawals stem from bankrupt estates, discontented holders, or arbitrage opportunities, the selling reflects normal market activities. This perspective is crucial in understanding the broader market dynamics and the roles various players inhabit within it.

As Grayscale’s Bitcoin Trust continues to experience pressure from competitors and sees its market lead diminish, the evolving landscape of Bitcoin ETFs remains a critical area to watch. With the gap closing between Grayscale and BlackRock’s iShares Bitcoin Trust, the industry is poised for further shifts in investor preference and strategy.