Grayscale Bitcoin ETF Faces Consecutive Outflows Amid Crypto Market Surge

The largest Bitcoin ETF in the world has marked a notable milestone: a full month of consecutive outflows.

According to Bloomberg data, the Grayscale Bitcoin Trust (GBTC), valued at $24.2 billion, has experienced a total outflow of $7.4 billion over the course of 31 consecutive trading days as of Monday. Since its conversion into an ETF in mid-January, GBTC has not recorded a single inflow.

This trend diverges from that of the other nine newly launched spot Bitcoin ETFs, all of which have seen net inflows since their inception. Several factors contribute to this discrepancy: GBTC, being the largest and most actively traded among its peers, comes with a management fee of 1.5%, making it the most costly option, whereas its competitors typically charge below 0.3%. Additionally, bankrupt entities such as Genesis Global Holdco LLC have sought to divest their holdings.

Despite these factors, including the restriction on redemptions in GBTC's previous structure, the consistency of outflows is surprising to industry observers. Amrita Nandakumar, president of Vident Asset Management, remarked, "Most of us in the industry expected to see outflows, we all knew it was coming — these long-term holders that were waiting for the fund to finally convert to get out." She added, "Does it go to 60 days? I don’t think so, but then again, I’m surprised to see it got to thirty."

While outflows have tapered off in recent days, with only $22 million leaving the fund on Monday compared to as much as $640 million in January, GBTC's year-to-date outflow of $7.4 billion ranks as the second largest among over 3,400 US-listed ETFs.

A spokesperson for Grayscale acknowledged the anticipated profit-taking and strategic investment shifts among GBTC's diverse shareholder base, expressing satisfaction with the stabilization of outflows despite pressures from estate bankruptcies. They emphasized GBTC's market-leading liquidity, robust trading volume, and established track record, predicting its continued significance as a primary risk transfer tool for Bitcoin in capital markets.

While GBTC continues to lose assets, the other nine spot Bitcoin ETFs launched in January are attracting substantial investments amid the cryptocurrency's upward momentum. Leading the pack are BlackRock and Fidelity, each drawing around $6 billion and $4 billion respectively, followed by Ark Invest and Bitwise.

Nevertheless, GBTC retains a devoted following within the cryptocurrency community for its resilience against regulatory hurdles. A court ruling in August, which deemed the Securities and Exchange Commission's obstruction of Grayscale's ETF conversion as "capricious," paved the way for last month's ETF launches. This brand of investor, driven by loyalty to Grayscale's defiance of the SEC, may overlook GBTC's comparatively high fee, according to Nandakumar.

Despite these challenges, GBTC's share price has surged by 40% this year, outpacing Bitcoin's 40% increase. On Wednesesday, the leading cryptocurrency surpassed $61,300 for the first time since late 2021.