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Grayscale GBTC Outflows Resume as Q1 Earnings Run Flat

Last Updated May 10, 2024 10:47 AM
Eddie Mitchell
Last Updated May 10, 2024 10:47 AM
Key Takeaways
  • Grayscales’s GBTC outflows have impacted Q1 2024 revenue figures.
  • The Grayscale Mini Bitcoin Trust could revive dwindling numbers.
  • GBTC has recorded net outflows of $17.5 billion since its launch in January.

The Grayscale Bitcoin Trust (GBTC) exchange-trade fund (ETF) has recorded another day of outflows after briefly breaking its 78-day outflow streak.

Grayscale parent company, Digital Currency Group (DCG), has also reported that Grayscale’s Q1 revenue has tracked sideways since Q4 2024, perhaps demonstrating the strain of GBTC outflows.

GBTC Outflows Continue

As per data on CoinGlass , the trend of GBTC exits has resumed since May 7, 2024, when $28.6 million (452.94 BTC) left the fund. The following day saw neutral flows across all ETF issuers except for Bitwise Bitcoin ETF (BITB), which saw net inflows of $11.5 million (184.6 BTC).

On May 9, GBTC outflows totaled $43.4 million (709.64 BTC). Meanwhile, a majority of the other issuers recorded very modest inflows, with BlackRock’s iShares Bitcoin Trust (IBIT) leading with $14.2 million (232.19 BTC), with the rest seeing no more than a few million each on average.

But how long can Grayscale continue to bleed before the launch of its lower-fee “spin-off” GBTC mini fund? Well, that depends if a disappointing Q1 revenue report will light a fire under Grayscale and force them to address the results.

Grayscale Q1 2024 Earnings Hit

Grayscale Investments parent company, Digital Currency Group (DCG) reported its Q1 earnings, which have taken a slide due to the $17.5 billion in net outflows from GBTC.

As per the shareholder letter , GBTC netted $156 million between January and March, which basically runs flat from Q4 2024. Some are pointing to the fact that the GBTC management fee of 1.5% is forcing investors to competitors such as BITB who offer a 0.2% fee. DCG writes in their letter:

“While Grayscale expected outflows alongside increased competition under the ETF wrapper, Q1 revenue attributable to GBTC nevertheless exceeded our expectations,”

That said DCG’s Q1 revenue overall is up 51% since the same time last year, which could largely be due to BTC’s price increasing over 120% in that same time frame.

Though Grayscale has said it would lower its fee, it is yet to do so. That said, it does plan to launch a Bitcoin Mini Trust ETF with significantly lower fees. This is currently pending approval from the U.S. Securities and Exchange Commission (SEC).

 Grayscale GBTC 78-Day Outflow Streak Over

GBTC recorded inflows for two consecutive days on May 7, 2024, bringing an end to the perilous 78-day outflow streak it had since launching, which averaged $218 million exiting GBTC every one of those days.

After accumulating shedding over $17.5 billion in outflows over that time, GBTC has now recorded approximately $63 million of net inflows since its launch on January 11, 2024, ending its lengthy outflow  woes.

Overall, it appears as though spot BTC ETFs are doing better, with ETF expert Eric Balchunas noting that they had all posted green inflows for the first time on May 6, 2024.

According to Grayscale’s fund page, GBTC now has $18.46 billion in assets under management (AUM), or just over 292k BTC tokens.

Observers are breathing a sigh of relief, assuming that this should hopefully be the end of the never-ending exits from GBTC. But, it’s worth noting that this positive inflow may be the result of Grayscale’s next big offering, the Grayscale Mini Bitcoin Trust.

Mini GBTC fund

So why the sudden turnaround? Well, this comes just as Grayscale prepares to roll out a spinoff spot Bitcoin ETF with significantly lower fees than what it is currently offering. What makes this so attractive is that GBTC holders can move over to this fund without creating a taxable event.

The mini fund will have a significantly lower fee of 0.15%, the cheapest on the market, and a massive reduction from GBTC’s fee of 1.5%.

According to the filing  with the U.S. Securities and Exchange Commission (SEC), Grayscale will contribute 10% of assets in GBTC into the new trust. Furthermore, shareholders can transfer into it without needing to pay capital gains as they do so.

Buying and Selling Pressure

Outflows from GBTC are believed to have put a fair amount of selling pressure on BTC, which pushes prices down. Speculatively, if GBTC continues to record positive flows, the price of BTC could stabilize or rally in the future.

According to crypto and financial expert, Wise Advice, Bitcoin ETFs are accumulating a huge amount of BTC tokens – 3450 to be exact – which suggests that ETF demand is outpacing the number of new tokens Bitcoin miners can supply.

If the ETF markets are beginning to turn, as many hope, decreases in selling pressure could lead to higher demand. This will also come as ETFs collectively buy more BTC than miners can create.

Similarly, if GBTC manages to maintain positive inflows whilst other BTC ETFs continue to post record-breaking numbers, a Bitcoin surge could be just around the corner.

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