A selloff in bitcoin that continued on Tuesday has been accompanied by record outflows from Grayscale’s Bitcoin Trust, accelerating the asset losses the fund has experienced since it converted into an exchange traded fund earlier this year.
Grayscale’s ETF notched a daily record of $642.5 million in outflows on Monday, according to data from BitMEX Research, when bitcoin tumbled about 4%. The cryptocurrency was down another 2% by mid-afternoon Tuesday, bouncing off its lows. Data for Tuesday’s flows will be available Wednesday morning.
Investors have been unloading holdings in the Grayscale fund since it converted into an ETF January 10. Meanwhile, money has flowed into the nine new spot bitcoin ETFs approved by the US Securities and Exchange Commission on the same date.
Monday’s outflows from the Grayscale ETF brought the total to roughly $12 billion since Jan. 10, though the 52% gain in bitcoin’s price has helped counterbalance some of those losses. The fund’s assets now stand at $27.2 billion, compared to $29 billion on the first day of trading in the new ETFs.
“As the largest and currently the most expensive bitcoin ETF, profit taking and redemptions are understandable,” said Todd Rosenbluth, head of research at VettaFi, a market analysis firm.
Grayscale didn’t immediately respond to requests for comment. The firm’s CEO, Michael Sonnenshein, told CNBC Tuesday that he had anticipated outflows and attributed them to arbitrage-related selling or liquidations by bankruptcy trustees of former crypto giant FTX.
Mr. Sonnenshein also said for the first time that the firm will cut fees on its fund “over time.” The current 1.5% fee is significantly higher than those levied by the nine other ETF providers. Their fees top out at around 0.25% although temporary waivers often bring them down to zero.
Most other bitcoin funds saw muted inflows or little net change in their assets. The lack of fresh buying, combined with the Grayscale outflows, made Monday the lowest single day for bitcoin ETF flows since late January.
“Money isn’t going to pour into these ETFs day after day,” said Mr. Rosenbluth. “It’s reasonable that people take profits after strong runs.” – Reuters
