Grayscale Bitcoin ETF Records First Inflows after $1.6 Billion Losses in 4-Months

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On May 3, 2024, Grayscale’s Bitcoin Trust (GBTC), the largest Bitcoin (BTC) exchange-traded fund (ETF) by assets, has reported its first net inflow since the US SEC approved 10 new ETFs in January 2024.

This comes after the fund experienced $1.6 billion in outflows before the Bitcoin halving.

Grayscale Records $63 Million Net inflow after 4 Months of Consecutive losses

On May 3, GBTC recorded a net inflow of $63 million, according to Official data from the investment fund.  This marked the first positive net flow for the fund since its conversion to an ETF in January, when 11 new spot Bitcoin ETFs were launched in the U.S.

At the time of writing, Grayscale now hold an active BTC balances worth $18 billion, remaining the largest Bitcoin ETF ahead of Blackrock’s IBIT fund.

Several factors contributed to the consistent outflows from GBTC since its conversion to an ETF. One of the major reasons is the fund’s annual management fee of 1.5%, which is substantially higher than other Bitcoin ETFs that charge less than 1%.

Furthermore, the sell-off of GBTC shares by bankrupt crypto companies, like FTX and Genesis, has also driven the outflows. FTX sold about $1 billion worth of GBTC shares, and Genesis liquidated approximately 36 million shares, valued at $2.1 billion, to purchase Bitcoin.

On the same May 3, the market as a whole experienced a net inflow totalling $378 million. Noteworthy performances included Franklin Templeton’s Bitcoin ETF (EZBC), which recorded its highest-ever inflow of $60.9 million, and Fidelity’s Bitcoin ETF (FBTC), which led the day with $102.6 million in inflows.

The inflow has stopped the streak of net withdrawals from Grayscale’s Bitcoin Trust (GBTC), At present, GBTC has $18.1 billion in assets, while IBIT has reached $16.9 billion. IBIT began with zero assets in January, whereas GBTC had over $26 billion. Although the inflow is a positive sign for GBTC, IBIT’s rapid growth is adding competitive pressure.

This shift from outflows to inflows in GBTC and the broader Bitcoin ETF market has brought a sense of optimism among investors, with some suggesting that this could be an early indicator of Bitcoin reaching new all-time highs. However, it remains to be seen if this momentum will continue, given the ongoing regulatory and market uncertainties.

Ethereum ETF: Grayscale remains hopeful

Grayscale says it’s confident that the U.S. Securities and Exchange Commission (SEC) will approve its spot Ethereum (ETH) exchange-traded funds (ETFs) by May, despite recent concerns about the SEC’s level of engagement with applicants and its ongoing investigation into the Ethereum Foundation.

Craig Salm, Chief Legal Officer at Grayscale, noted the similarities between the approval processes for spot Bitcoin ETFs and spot Ethereum ETFs, emphasizing that the core operations are fundamentally the same, with the key difference being the underlying asset – Bitcoin versus Ethereum.

This consistency, according to Salm, should make the SEC’s review process more straightforward, contributing to Grayscale’s optimism for a positive outcome.

Grayscale’s outlook stands in contrast to that of Bloomberg ETF analysts Eric Balchunas and James Seyffart. Both observers have reduced their expectations for spot Ethereum ETF approval in May to just 25%.

Balchunas suggested that the SEC’s apparent lack of engagement could be deliberate rather than merely a delay.

Cryptocurrency exchange Coinbase has also encouraged the SEC to approve Grayscale’s proposed spot Ethereum ETF. In a letter to the SEC, Coinbase argued that the logic used to justify the approval of spot Bitcoin ETFs applies equally, if not more strongly, to the case for spot Ethereum ETFs.

The SEC is expected to make a decision on VanEck’s application by May 23, with the fate of other applicants expected to be announced around the same time. Companies like BlackRock, VanEck, Fidelity, and Grayscale are all actively pursuing approval for their spot Ethereum ETFs.

Grayscale’s confidence in the SEC’s approval of spot Ethereum ETFs is based on the parallels between the processes for spot Bitcoin and spot Ethereum ETFs.

The company believes that the key issues the SEC addressed during the spot Bitcoin ETF approval process are largely the same for spot Ethereum ETFs, suggesting that the regulator’s experience with Bitcoin may pave the way for Ethereum.