Bitcoin’s Tumultuous Tide: GBTC Faces Historic Outflow

In a dramatic turn of events, Grayscale’s Bitcoin ETF, known as GBTC, experienced a record-breaking outflow of $643 million in a single day, coinciding with a downturn in Bitcoin’s market value. This significant financial movement marked the largest single-day loss for GBTC, as reported by BitMEX Research and noted by Bloomberg Intelligence ETF analyst Eric Balchunas.

The vast outflow from GBTC significantly impacted the overall net flow for spot Bitcoin ETFs, culminating in a net deficit of $154.4 million for the day. This occurrence is part of a broader trend for the Grayscale Bitcoin Trust, which saw a whopping $7.4 billion exit the fund in its initial 31 trading days, starkly contrasting with the net inflows observed in other newly launched spot Bitcoin ETFs.

Several factors contribute to the substantial outflows from GBTC, including its relatively high management fee of 1.5%, considerably more than the less than 0.3% fees charged by its competitors. Additionally, the financial distress of Genesis Global Holdco LLC, which has been liquidating its GBTC shares amid bankruptcy proceedings, further exacerbates the fund’s outflow.

Despite some analysts anticipating outflows during the fund’s prospective conversion, the scale and persistence of these withdrawals were unexpected. Although the outflow rate for Grayscale’s Bitcoin ETF momentarily dipped to around $22 million in late February, it has since surged, disrupting the previously declining trend.

Simultaneously, the value of Bitcoin has been on a downward trajectory, with CoinMarketCap data revealing a decrease to $64,661, marking a nearly 6% decline over 24 hours and a double-digit percentage fall from the previous week.

Crypto.com’s CEO Kris Marzsalek commented on the market’s downturn, viewing it as a beneficial correction that purges excess leverage from the system. He expressed a preference for gradual market growth, advocating for steady investment inflows to foster a more sustainable and less volatile industry environment over the next 12 to 18 months.