Grayscale Bitcoin Trust faces outflows of $7.4 billion in its first month, despite Bitcoin’s rally: Bloomberg data

The Grayscale Bitcoin Trust (GBTC), the world’s largest Bitcoin ETF, has been hemorrhaging funds for a month straight, raising questions about its future. Data from Bloomberg shows a staggering $7.4 billion has exited GBTC across 31 consecutive trading days as of Monday.

This starkly contrasts with the nine other recently launched spot Bitcoin ETFs, which have all attracted net inflows since their inception.

These newcomers offer lower fees, with most charging under 0.3% compared to GBTC’s hefty 1.5% management fee. Further contributing to the outflows are bankrupt estates like Genesis Global Holdco LLC selling off their GBTC holdings.

NEW: Grayscale's #Bitcoin ETF $GBTC outflows slow for 3rd day, hitting record low of 💵 $22.4M. pic.twitter.com/6dBv2DUky6

— Bitcoin News (@BitcoinNewsCom) February 27, 2024

While these factors explain the initial outflow, industry experts are surprised by its duration and consistency. “I’m surprised to see it got to thirty,” said Amrita Nandakumar, President of Vident Asset Management, highlighting the unexpected length of the outflow period.

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Grayscale Bitcoin Trust Retains Loyal Following Despite Challenges

However, there’s a silver lining. Outflows have slowed down recently, with Monday seeing only $22 million leaving the fund, a far cry from the January peak of $640 million. This suggests a potential stabilization in the coming days.

Despite the recent slowdown, GBTC’s year-to-date outflow of $7.4 billion remains the second-largest among over 3,400 US-listed ETFs.

Meanwhile, the spot Bitcoin ETF landscape paints a different picture. These newer funds, launched in January, have collectively raked in billions of dollars as the cryptocurrency rallies.

Industry giants like BlackRock and Fidelity lead the pack, amassing substantial inflows. Daily trading volume for spot Bitcoin ETFs also reached an impressive nearly $2 billion earlier this week, showcasing their growing popularity.

Despite the challenges, GBTC retains a loyal following among certain investors who value their historical success in navigating regulatory hurdles. Additionally, GBTC’s share price has increased by 40% year-to-date, outperforming Bitcoin itself, which has risen by 34%.

It remains to be seen whether GBTC can reverse its outflow trend and adapt to the changing landscape of the Bitcoin ETF market. The coming weeks will be crucial in determining the fund’s future.