Investors have been pulling funds out of Grayscale’s Bitcoin exchange-traded fund (ETF) at a significant rate, but some analysts believe the worst may be over.
On March 21st, Grayscale’s Bitcoin Trust (GBTC) experienced another day of hefty outflows, with nearly $359 million exiting the fund. This follows a record-breaking outflow day of $642 million on March 18th, according to data from Farside Investors.
Combined with the previous three days, the total outflows for GBTC this week amount to a staggering $1.8 billion. This marks the fourth consecutive day of net outflows across all ten Bitcoin ETFs currently available.
However, there appears to be a glimmer of hope. Senior Bloomberg ETF analyst Eric Balchunas took to social media on March 21st, suggesting that a significant portion of the outflows might be nearing an end. He believes the consistency and size of the recent outflows point towards bankrupt crypto firms being a major contributor.
Balchunas theorizes that outflows linked to bankruptcies, such as Gemini/Genesis, might be fueling Bitcoin (BTC) purchases with cash, hence the relative stability in the overall market. He concludes by suggesting that once these large-scale outflows cease, the remaining activity will likely resemble the smaller outflows observed in February, potentially indicating a return to a more normal flow pattern.
As of March 21st, Grayscale reported that its Bitcoin Trust manages a total of $23.2 billion in assets. Since its conversion to an ETF on January 11th, GBTC has shed a substantial $13.6 billion.
Supporting Balchunas’ theory, independent researcher ErgoBTC suggests that a significant portion of the recent outflows (approximately $1.1 billion) might be attributed to bankrupt crypto lender Genesis. They observed a correlation in the timing and volume of fund movement between GBTC and Genesis. With limited large Bitcoin transactions occurring daily, ErgoBTC believes this points towards a connection between the outflows from GBTC and inflows into Genesis.
Pseudonymous crypto commentator Whale Panda echoes this sentiment, highlighting a statement released by Genesis on March 19th. The statement confirmed the firm’s intention to return assets to creditors “in kind,” implying that Genesis would be selling GBTC shares to acquire Bitcoin. This action aligns with the court-approved liquidation of Genesis’ $1.3 billion worth of GBTC shares in February, initiated to repay creditors. Additionally, bankrupt cryptocurrency exchange FTX also liquidated its entire GBTC holdings (22 million shares) in January, further contributing to the recent outflows.
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Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.
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