Grayscale’s GBTC Outflows: Slowing at $7B

Grayscale, a crypto asset manager, has seen a decrease in outflows from its spot Bitcoin ETF fund. Data from Bianco Research and Farside shows that since the conversion to a spot Bitcoin ETF, Grayscale’s GBTC fund has experienced total outflows of $7 billion as of February 16. Although the rate of outflow has slowed down significantly, experts such as Nate Geraci, President of ETF Store, believe that there may still be further decreases in the fund’s assets. In January, the largest portion of outflow occurred, with $5.64 billion leaving GBTC, while February has only seen $1.37 billion in outflow so far. Geraci and other experts believe that additional outflows may occur.

Jim Bianco, founder of Bianco Research and former Wall Street analyst, suggests that many investors rebalance their portfolios and shift to spot Bitcoin ETFs with lower fees, leading to the outflow from Grayscale. He notes that the new batch of ETFs have reduced fees, charging between 0 and 12 basis points (bps), while Grayscale still charges 150 bps. Another reason for the continued outflow, according to Bianco, is that Grayscale’s fund traded at a significant discount to the market price of Bitcoin, around a 44% discount, when BlackRock filed for its spot ETF in June 2023. As Grayscale converted to an ETF on January 11, 2024, they began closing this type of trade, known as “arbitrage”, as their objectives were achieved.

Despite the slowdown in outflows, Geraci believes that the asset bleed will continue. He suggests that Grayscale can afford to have their assets reduced by 90% and still outperform other issuers. Geraci also speculates that Grayscale may launch a new spot Bitcoin ETF called “mini-GBTC” with significantly lower fees. Further outflows could occur as a result of a judge’s order allowing bankrupt crypto lender Genesis to sell off some of its investments from Grayscale. Court documents reveal that Genesis held approximately $1.6 billion worth of shares in GBTC, Grayscale Ethereum Trust (ETHE), and Grayscale Ethereum Classic Trust (ETCG).