Grayscale's Bitcoin ETF Faces Unprecedented $1.1 Billion Withdrawal in Three Days

Grayscale’s spot Bitcoin exchange-traded fund (ETF) witnessed a massive outflow of approximately $1.1 billion in just three days, marking the fund’s most significant outflow since its conversion to a spot ETF. The third day alone saw an estimated $594 million exit, as reported by Bloomberg ETF analyst James Seyffart on January 16. This surge in outflows coincided with the fund’s discount narrowing to its lowest level in almost three years.

Today is likely to be a net outflow day for the #bitcoin ETFs. Estimating ~$594 million left $GBTC for a total of $1.173 billion in outflows. Most others saw inflows but doubt its enough to offset nearly $600 mln out of $GBTC https://t.co/elD9qkyjj2
— James Seyffart (@JSeyff) January 17, 2024

Per a recent Bloomberg report, significant withdrawals from Grayscale’s Bitcoin Trust in the initial ETF trading days, amount to approximately $579 million. In contrast, the other nine spot Bitcoin ETFs experienced nearly $819 million in inflows, indicating a shift in investor preference towards more cost-effective Bitcoin ETF options.

Seyffart, in his X post, highlighted the contrasting inflows experienced by other recently launched Bitcoin ETFs. However, he expressed doubt about these compensating for the significant outflows from Grayscale’s Bitcoin Trust (GBTC).

For years, GBTC was a lucrative option for investors leveraging the Grayscale premium, which soared to a peak of 43% in July 2019. This dynamic, however, drastically changed in February 2021 when the premium turned into a discount, trapping many investors due to a mandatory six-month lock-up period.

With the conversion of GBTC into a spot ETF, the discount has reduced significantly, now at around 1.55%, prompting investors, especially those with long-locked funds, to withdraw. This massive withdrawal has led to GBTC offloading about 27,000 Bitcoin, valued at around $42,800 each, significantly reducing its holdings.

Alongside Grayscale’s significant holding of 605,891 Bitcoin, other key players like BlackRock and Fidelity also maintain notable positions with holdings of 11,439 and 9,750 BTC, respectively, as per X account CC15Capital’s data. However, it must be noted that these figures might not be entirely up-to-date.

As of now, the financial landscape is witnessing a pivotal shift as investors gravitate towards physically-backed Bitcoin ETFs, seeking efficient and direct exposure to the digital currency. This trend is evident when looking at the substantial capital inflows into BlackRock’s IBIT and Fidelity’s FBTC, which attracted nearly $500 million and $421 million, respectively, in their initial trading days.