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GBTC Negative Outflows Problem: Grayscale Bitcoin ETF’s Survival Hinges on Key Move

Last Updated March 19, 2024 1:10 PM
Shraddha Sharma
Last Updated March 19, 2024 1:10 PM
By Shraddha Sharma
Verified by Peter Henn

Key Takeaways

  • Grayscale Bitcoin Trust (GBTC) experienced a record $642.5 million outflow in a single day.
  • CEO Michael Sonnenshein announced plans to reduce fees over time.
  • GBTC’s outflow anomaly comes after the overall digital assets ETF market recorded $2.9 billion inflows.
  • BitMEX Research suggests Grayscale’s staking policy will be crucial in addressing outflows.

Grayscale Bitcoin Trust (GBTC) continues to stand out in net outflows with single-day withdrawals pulling down the Bitcoin ETF market. Grayscale is in focus as the overall inflows exceeded $2.9 billion in a week. CEO Michael Sonnenshein said that taking action over time while staking might become a crucial aspect of stemming outflows.

Grayscale Turns Fund Flows Negative

Data from Bloomberg Intelligence reveals  overall outflows from Bitcoin ETFs are due to Grayscale and its poor recent performance. On March 18, GBTC saw $643 million in outflows, leading the total net outflow from Bitcoin spot ETFs to  $154 million.

In contrast, iShares Bitcoin Trust (IBIT) enjoyed a substantial influx of $451.5 million on the day. IBIT surpassed GBTC by around $9 billion in total volume, indicating a new preference among investors.

GBTC’s assets totalled less than $25 billion but outflows point to a potential loss of investor confidence. According to Lookonchain , Grayscale has reduced its Bitcoin holdings by 3,726 BTC. As a result, Grayscale holds a total of 380,241 BTC. In total, nine ETFs, including Grayscale, added 1,142 Bitcoin to their holdings, which are now worth about $76.9 million.

How Grayscale Plans to Face Challenges

Grayscale’s struggle is not limited to outflows but competition. GBTC faces intense competition from lower-cost alternatives. On CNBC , Grayscale CEO Michael Sonnenshein acknowledged fee reductions.

He said: “I’ll happily confirm that, over time, as this market matures, the fees on GBTC will come down.”

In the interview, he also revealed plans to introduce less costly investment methods. It will include a “mini” version of its fund as part of a broader strategy to retain and attract investors.

Meanwhile, BitMEX Research noted that SEC’s green light to staking can have positive implications for GBTC. The research firm cautions that should  Grayscale fail to implement staking or manage large initial outflows effectively, the consequences could be severe.

It noted in a tweet: “Given what happened to GBTC if Grayscale doesn’t manage to do staking, outflows could be even more intense.”

Capping in Outflows

Grayscale is seeing a competitive market while it pulls down the overall fund flows from Bitcoin ETFs. The company’s response, including fee adjustments and new investment products, could help it redefine its place in the market.

Given BitMEX Research’s signal on the importance of staking and the pressing need to lower fees, Grayscale’s upcoming moves will help determine its trajectory.

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