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Grayscale’s ETF nears $4bn in outflows as Bitcoin decline slows

Grayscale’s ETF nears $4bn in outflows as Bitcoin decline slows
Grayscale's flagship fund has found it tough to adjust to life as an open-ended product, with investors pulling billions in the first two weeks of trading. Credit: Shutterstock / Rcc_Btn
  • Grayscale continues to dominate the Bitcoin ETF market in terms of volume.
  • However, most of it was in outflows, which analysts say have been a ‘drag for crypto markets.’

Bitcoin exchange-traded fund flows and volumes continue to take centre stage, as analyst say outflows are acting as a drag on the crypto market.

Grayscale’s GBTC has dominated the Bitcoin ETF market in terms of volume, and did so again on Tuesday, but it’s not always good to be an outlier.

Around $515 million left GBTC, following $640 million in outflows on Monday. Bringing the total outflows since January 12 to just over $3.96 billion.

In total, between all 10 spot Bitcoin ETFs, net outflows reached $106 million on Tuesday, according to BitMEX Research.

After eight days, net inflows was about $983 million across all 10 ETFs, the firm said.

Grayscale has been criticised for its high fees since its fund first launched as a close-ended trust in 2013.

While the digital asset manager did drop its fees from 2% to 1.5% after converting to an ETF its still much higher than the competition.

Compare those of BlackRock’s. The world’s largest asset manager charges 0.12% for its Bitcoin ETF, which has attracted $1.6 billion since it launched.

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BlackRock’s fee will rise to 0.25% after 12 months, still considerably lower than Grayscale’s fee.

JPMorgan analysts said the outflows were an “additional drag for crypto markets,” last Thursday.

Bitcoin was trading around $40,100 on Wednesday morning in the UK.

It has erased all of its gains made leading up the the approval of spot ETFs, when it peaked around $49,000.

The slide has eased off somewhat in the past 24 hours, with Bitcoin gaining 3% to climb back above $40,000 after flirting with levels around $38,000 on Tuesday.

While Bitcoin slide might have abated for now, things could get worse for Grayscale, JPMorgan said last week, as it estimates an additional $10 billion could leave the fund.

“Liquidity and market depth also matter but again there is risk for GBTC on that front also if other spot Bitcoin ETFs manage to reach critical mass in terms of size and liquidity,” JPMorgan said.

Liquidity typically refers to the ability to sell an asset for cash. Less liquidity poses a risk for investors as they could find it hard to sell their shares.

“A lot more capital, perhaps an additional $5 billion to $10 billion, could exit GBTC if it loses its liquidity advantage,” the report said.

Adam Morgan McCarthy is a markets correspondent for DL News. Have a tip? Contact the author at