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GBTC Outflows Slow to a Crawl: Lowest Volume Since ETF Approval

Does the drop in withdrawals mean a shift in investors’ strategies?  

Grayscale's Bitcoin Trust (GBTC) witnessed its lowest withdrawal volume since its transformation into an exchange-traded fund (ETF) on February 23. The fund reported outflows amounting to $44.2 million, marking a notable slowdown in the pace of withdrawals that have been observed recently. This change comes after Grayscale converted GBTC from an over-the-counter product to an ETF on January 11, initiating a new chapter in its offering to investors.

Comparative analysis of crypto investment trends

Data from BitMEX Research highlights the recent performance of GBTC in the volatile crypto market. On February 23, GBTC's outflows hit the lowest daily volume recorded since its ETF conversion, totaling $44.2 million. This is a stark contrast to the previous month's activity, where GBTC experienced a substantial $5.64 billion in withdrawals by the end of January, with a peak single-day withdrawal of $640 million on January 22. The month of February has seen a decline in outflows, accumulating to $1.8 billion, bringing GBTC's total withdrawals since inception to $7.4 billion.

The cryptocurrency investment landscape shows varying degrees of activity among different funds. BlackRock’s IBIT leads with over $6.6 billion in investments, followed closely by Fidelity’s FBTC, which has garnered more than $4.7 billion. ARK 21Shares holds the third position with $1.4 billion in inflows. This diverse performance indicates shifting investor preferences and strategies in the crypto ETF space.

BitMEX Research(@BitMEXResearch) tweeted:

"Bitcoin ETF Flow - 24 Feb 2024

All data now in, except perhaps for the Galaxy/Invesco product

Friday was a strong day, with +$232.3m of net inflow. Also, the outflow for GBTC was just $44m, lowest level since 11th Jan pic.twitter.com/1Q0OtjEJLt"

The reduction in GBTC's outflows can be attributed to the United States Securities and Exchange Commission's approval of the spot Bitcoin ETF on January 10, which allowed GBTC holders to convert and redeem their shares directly, offering an alternative to selling shares on the secondary market. 

Furthermore, the competitive landscape has prompted investors to reallocate their portfolios towards ETFs with lower fees, as GBTC charges a 1.5% annual management fee, compared to other issuers charging as low as 0.19%.

Despite facing challenges, including potential sales of $1.3 billion in shares by the bankrupt crypto firm Genesis Global Holdco, Grayscale's fee structure may offer a silver lining. 

Nate Geraci, president of ETF Store, remarked:

"They can have assets chopped by like 90% and still make more than all of the other issuers combined,"