21 April, 2024



Grayscale Outflows Slow Down, Potential for Improved US Bitcoin ETF Flows

07 Mar, 2024

07 Mar, 2024

  • Vetle Lunde suggests GBTC outflows are neutral and driven by investors transitioning to actual Bitcoin.
  • Estimates indicate Genesis has sold 21,902 BTC with around 9,300 BTC yet to be sold.
  • Lunde predicts Grayscale outflows to normalize improving U.S. spot ETF flows by week’s end.

A recent X post by Vetle Lunde, a Senior Analyst at K33 Research, offered a fresh take on the surge in outflows from Grayscale’s Bitcoin Investment Trust (GBTC). Lunde pointed out that the timing of this increase coincides with Gemini Earn’s announcement of a settlement with Genesis where Genesis plans to repay creditors using GBTC shares.

In a February 14 court hearing, Genesis Global Holdco received approval to liquidate $1.3 billion worth of Grayscale Bitcoin Trust (GBTC) shares. This move aims to repay investors following the company’s bankruptcy filing. The sale includes roughly 35 million GBTC shares alongside additional holdings in Grayscale’s Ethereum and Ethereum Classic Trusts bringing the total value to $1.6 billion according to Genesis’s filings.

Lunde argued that most of these GBTC outflows might not significantly impact the overall Bitcoin market. He believes this is because investors are likely selling their GBTC shares to buy actual Bitcoin (Spot Bitcoin). 

However, understanding who’s selling is crucial as it can significantly impact the overall Bitcoin market. Outflows from Genesis, a crypto company, are seen as neutral because they’ll use the proceeds to buy more Bitcoin and repay debts. On the other hand, outflows from older GBTC holders (legacy holders) are considered negative for the market as they represent new selling pressure on the actual Bitcoin price.

Source: Vetle Lunde

Estimates suggest that Genesis still holds around 10.4 million GBTC shares to sell as of March 7 based on the daily outflows from February 1 to February 13 and the subsequent excess daily flows. These estimates indicate that Genesis has already sold approximately 21,902 BTC worth of GBTC exposure since February 14 leaving around 9,300 BTC yet to be sold.

Predicting the trajectory, Lunde stated that all Gemini/Genesis flows are anticipated to conclude by the week’s end. This could lead Grayscale to witness outflows reverting to early February levels setting the stage for improved net U.S. spot ETF flows.

Source: Vetle Lunde

Lunde wrote further on Cumulative Excess GBTC Outflows saying,

This figure, while not exactly correct, allows us to benchmark that Genesis has sold 21,902 BTC worth of GBTC exposure since February 14, with a remaining ~9,300 BTC left to sell.

Grayscale Bitcoin Trust experienced negative fund flows since its conversion to an ETF in mid-January. However, these outflows slowed down by February 26, reaching a low of $22 million.

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