Last week, the US Securities and Exchange Commission (SEC) granted approval for the conversion of a trust into an Exchange-Traded Fund (ETF), marking a significant milestone for Grayscale. Unfortunately, this milestone has been diluted by substantial investor withdrawals amounting to approximately $579 million.
On the other hand, the other spot Bitcoin ETF issuers have collectively amassed approximately $1.4 billion since the approval. James Seifert, Bloomberg’s ETF analyst, noted the significance of the ETF conversion, providing unprecedented clarity on GBTC flows.
While GBTC shares amounting to over $2.3 billion changed hands on the first trading day, outflow data show that part of that volume included sales. In the last ten years, Grayscale has been dominating the market.
Zach Pandl, Grayscale’s research MD, acknowledged the evolving landscape with new market entrants and asserted that it’s natural for new digital assets to experience turbulence before gradually taking off. He also highlighted the importance of total net flows into Bitcoin investment products while emphasizing that they can negatively impact prices.
Bloomberg Intelligence suggests that withdrawals from the fund will likely reach over $1 billion in the short term. Many investors said that they were now redirecting their funds to Bitcoin ETFs which they considered to be more cost-effective.
GBTC is currently the priciest US ETF directly investing in Bitcoin, with an expense ratio of 1.5%. On the other hand, the VanEck Bitcoin Trust, the second-costliest fund, imposes a 0.25% charge.
BlackRock’s IBIT attracted nearly $500 million within the initial two days of trading, while Fidelity’s FBTC secured almost $421 million. These inflows underscore the high demand for Bitcoin exposure in physically backed ETFs, extending beyond potential initial funding from issuers.