Grayscale is sending Bitcoin to Coinbase. Grayscale’s Bitcoin has witnessed a significant downturn this week, plummeting over 14%, despite the recent approval of spot crypto exchange-traded funds (ETFs) just over a week ago. Surprisingly, Grayscale, the digital asset manager under the umbrella of the crypto giant Digital Currency Group, seems to be playing a substantial role in this market shake-up.
Grayscale’s Bitcoin ETF, which commenced trading last week alongside 10 similar products, was previously a closed-end fund, preventing investors from redeeming their shares for BTC. However, with its transformation into an ETF, investors are capitalizing on the opportunity to withdraw significant amounts.
Grayscale’s Bitcoin Trust (GBTC) Exodus
Within hours of knowing that Grayscale is sending Bitcoin to Coinbase, investors in Grayscale’s Bitcoin Trust (GBTC), which recently transformed into a Bitcoin ETF post-SEC approval, are swiftly exiting their positions, triggering a noteworthy sell-off that has left analysts taken aback.
Previously, the Trust operated as a closed-end fund, barring investors from redeeming their shares for BTC. However, with its recent transition into an ETF, investors are capitalizing on the opportunity to cash out, leading to substantial market implications.
Within the first few days of trading, over half a billion dollars was withdrawn from Grayscale’s Bitcoin ETF. In the last five days alone, the fund has seen a staggering $2.2 billion leaving, as reported by Bloomberg data.
Contrasting Trends
Interestingly, while Grayscale is sending Bitcoin to Coinbase and Bitcoin ETF experiences significant outflows, other ETFs are witnessing substantial inflows. BlackRock’s iShares Bitcoin Trust (IBIT) has emerged as the current leader, attracting $1.2 billion in inflows.
Analysts Express Surprise
On the news Grayscale is sending Bitcoin to Coinbase, Senior ETF analysts at Bloomberg have conveyed their surprise at the substantial outflows experienced by GBTC. The abrupt nature of the sell-off has caught many in the industry off guard.
Bleeding Continues, Questions Arise
The notable question now lingering is when this substantial outflow from Grayscale’s Bitcoin ETF will come to a halt. Despite efforts to manage the daily challenges, the continuous outflows present a formidable challenge for market participants.
Industry observers note that the outflows are a result of traders exiting their positions to secure profits after previously locking in funds. GBTC, with the highest fees among US spot Bitcoin ETFs at 1.5%, is prompting investors to cash out, especially with competitors like BlackRock’s IBIT offering lower fees.
Bitcoin Transfers to Coinbase
Investors fleeing GBTC are transferring large amounts of BTC to Grayscale for selling to their custodian, American crypto exchange Coinbase. On-chain data from Arkham Intelligence reveals that Grayscale sent nearly $500 million in Bitcoin to Coinbase in the last six hours alone.
Market Insights
James Butterfill, head of research at European asset manager CoinShares, suggests that the outflows likely explain the decline in BTC’s price. He emphasizes that further price weakness depends on when GBTC holders stop selling, acknowledging the impact of GBTC’s relatively high fees.
Grayscale’s Perspective
Despite the outflow, Grayscale reports success, citing huge trading volumes. John Hoffman, managing director of sales and distribution at Grayscale, affirms that GBTC has dominated trading volume, serving as a leading risk transfer medium and the best-performing all-spot Bitcoin ETF since its launch.
Thus, the cryptocurrency market is currently navigating significant turbulence as Grayscale is sending Bitcoin to Coinbase. The abrupt transition from a closed-end fund to an ETF has prompted substantial sell-offs, contributing to Bitcoin’s recent 14% decline. While other ETFs enjoy notable inflows, Grayscale’s high fees and the resulting cash outflows are reshaping market dynamics.
Also Read: Chainalysis Reveals Decline in Crypto Crime, Stablecoins Emerge as Preferred Choice.
