Grayscale GBTC Faces $7B in Outflows Amid Increased Competition
Grayscale’s Bitcoin Trust (GBTC) has experienced significant outflows, with $7 billion withdrawn since its conversion to a spot Bitcoin ETF. While the outflows appear to be slowing, the fund, once a leading player in the market, is facing mounting competition from ETFs launched by BlackRock and Fidelity, both of which have seen considerable inflows.
Outflows from GBTC Total $7B
A substantial portion of the outflows occurred in January, with $5.64 billion leaving GBTC by the end of the month. February has seen a slowdown, with only $1.37 billion in withdrawals so far. Despite this slowdown, the trend of outflows from GBTC may continue, according to market experts.
ETF Store President Nate Geraci pointed out in a recent tweet that while the pace of outflows has decelerated, he believes GBTC may continue to experience outflows. The fund’s assets under management (AUM) remain substantial, still well over $20 billion.
Factors Driving GBTC’s Decline
Grayscale, once dominating the spot ETF market, has seen its market share drop significantly, now accounting for only about 30% of the trading volume, down from over half in previous periods. According to Kaiko’s data, this decrease is largely attributed to the rise of newer spot Bitcoin ETFs launched on January 11, 2024, which began with zero assets but have quickly gained traction.
Two primary factors are driving the outflows from GBTC. First, competition from funds with lower fees has attracted investors away from Grayscale. GBTC charges a relatively high fee of 150 basis points (bps), while competing funds offer fees as low as 0 to 12 bps, making them more appealing options.
Second, before its conversion to an ETF, GBTC traded at a significant discount to Bitcoin’s market price. This discount, which reached as much as 44% on June 13, 2023, created an arbitrage opportunity for investors. However, with the launch of a spot Bitcoin ETF by BlackRock in June 2023, investors began to shift their focus to less expensive alternatives.
As a result, when Grayscale transitioned to an ETF on January 11, 2024, many investors closed their positions, taking profits from the arbitrage trade and contributing to the observed outflows from the fund.
