The approval of spot Bitcoin ETFs was anticipated to be a positive catalyst for Bitcoin’s price. However, the reality has been starkly different, with Bitcoin experiencing a decline.
The crypto market witnessed a rocky day as Grayscale’s Bitcoin Trust (GBTC) experienced a staggering outflow of $640 million, marking the highest single-day withdrawal in its history.
The Grayscale Bitcoin Exodus
Bloomberg analyst James Seyffart highlighted the alarming trend earlier today in a post on X, terming it a “bad day for Bitcoin ETFs.” The total outflow for GBTC now stands at an eye-watering $3.45 billion.
This event marks a pivotal moment in what Seyffart aptly refers to as the “Cointucky Derby”, a term coined by Bitcoin analyst Eric Balchunas to describe the fierce competition among ETF issuers reminiscent of the prestigious Kentucky Derby horse race.
Woof. BAD day for #Bitcoin ETFs overall in the Cointucky Derby. $GBTC saw over $640 million flow out today. Outflows aren't slowing — they're picking up. This is the largest outflow yet for GBTC. Total out so far is $3.45 Billion. (Don't have BlackRock data yet) pic.twitter.com/jNOyiTADVq
— James Seyffart (@JSeyff) January 23, 2024
With the SEC’s approval of the spot Bitcoin ETF, the race has intensified, leading to heightened anxieties within the crypto community. Seyffart’s analysis suggests that most ETFs in the “Cointucky Derby” are grappling with downturns, as overall ETF outflows reached $21 million in the past week.
The approval of spot Bitcoin ETFs was anticipated to be a positive catalyst for Bitcoin’s price. However, the reality has been starkly different, with Bitcoin experiencing a decline since the ETFs were approved. The optimistic forecasts for Bitcoin’s price have not materialized, prompting a reassessment of the impact of ETFs on the market.
Peter Schiff, a prominent financial commentator, echoed concerns about the prevailing bear market in Bitcoin ETFs. In a post, Schiff noted a 20% drop from peak levels, singling out Fidelity Investment’s FBTC as the biggest loser with a 32% fall.
Initially, crypto funds received notable inflows, totaling $1.25 billion the previous week. Since its launch, Grayscale’s GBTC has received $4.1 billion in inflows. BlackRock Inc (NYSE: BLK) and Fidelity Investments led the way with their ETFs, IBIT and FBTC, which contributed considerably to the overall inflows. However, recent outflows have prompted worries about the long-term viability of these assets.
Notably, crypto analyst Ali Martinez highlighted that, excluding Grayscale, Bitcoin ETF issuers collectively acquired over 86,320 BTC, signaling a substantial $3.63 billion investment. This strategic, long-term approach suggests that seasoned institutions might be viewing the current market conditions as an opportunity rather than a peak purchase.
FTX’s Role in GBTC Outflows
Bloomberg analyst Eric Balchunas revealed that 35% of GBTC outflows are being directed towards other Bitcoin ETFs. FTX, a major player in the crypto trading space, sold 22 million shares worth close to $1 billion of Grayscale’s Bitcoin ETF, explaining much of the outflow, according to sources.
FTX’s role in the Grayscale exodus involves capitalizing on the price disparity between Grayscale trust shares and the net asset value of Bitcoin. The trading entity held a substantial amount of GBTC, valued at $597 million in October 2023, which later rose to around $900 million on the first day of Grayscale’s bitcoin ETF trading.
At the time of writing, Bitcoin is down by 4.23% to $39,169.82 amid the ongoing market rout.
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