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Bitcoin Selloff and Grayscale’s Outflows Continue

By Suzanne McGee

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The selloff in bitcoin shows no sign of slowing down, with record outflows from Grayscale’s Bitcoin Trust exacerbating losses. Since the fund converted into an exchange traded fund earlier this year, asset losses have been accelerating.

Grayscale’s ETF experienced a staggering $642.5 million in outflows on Monday, marking a daily record, according to data from BitMEX Research. This occurred as bitcoin dropped approximately 4%. The cryptocurrency continued its decline on Tuesday, falling an additional 2% by mid-afternoon before rebounding.

Since the conversion of the Grayscale fund into an ETF on January 10, investors have been offloading their holdings. In contrast, money has been flowing into the nine new spot bitcoin ETFs that were approved by the U.S. Securities and Exchange Commission on the same date.

Monday’s outflows pushed the total losses from the Grayscale ETF to around $12 billion since January 10. Despite this, the 52% increase in bitcoin’s price has helped mitigate some of these losses. The fund’s assets now stand at $27.2 billion, compared to $29 billion on the first day of trading for the new ETFs.

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“Given that Grayscale’s ETF is currently the largest and most expensive bitcoin ETF, it is understandable that investors are taking profits and redeeming shares,” explained Todd Rosenbluth, head of research at VettaFi.

In a statement, Grayscale acknowledged that shareholders were likely engaging in profit-taking, arbitrage, and share liquidation to settle debts, resulting in outflows from the fund.

Grayscale CEO Michael Sonnenshein indicated that the firm plans to reduce fees on its fund gradually. The current 1.5% fee is notably higher than those charged by the other nine ETF providers, with fees typically capped at around 0.25% and sometimes temporarily waived.

While most other bitcoin funds saw minimal inflows or marginal changes in assets, the combination of subdued buying activity and substantial outflows from Grayscale made Monday the slowest day for bitcoin ETF flows since late January.

“It’s not realistic to expect continuous inflows into these ETFs,” Rosenbluth noted. “After significant price gains, it is reasonable for investors to capitalize on profits.”

(Reporting by Suzanne McGee; Editing by Ira Iosebashvili, William Maclean and David Gregorio)

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