Spot Bitcoin ETF approvals have arrived, and today marks the fourth trading day. Volumes are strong, but there’s a significant issue. GBTC began trading at a negative premium in early 2021, which at one point approached 50%. It has continued to find buyers at a negative premium for a long time. Now, even if this were to be zeroed out, another problem has arisen.
GBTC Loses Its Luster
We recently saw the negative premium drop to single digits as belief in ETF approvals increased, making easy gains attractive. Grayscale Bitcoin Trust (GBTC) provided institutional investors with easy access to Bitcoin. However, following the approval of spot Bitcoin exchange-traded funds (ETFs), the emergence of lower-fee funds and the elimination of the negative premium increased the appetite for sales. Perhaps Grayscale did not lower its fees to competitive levels because it believed that sales would continue to dominate.
Since the Bitcoin ETFs began trading, we have seen a continuous decrease in GBTC’s Bitcoin reserves. On January 11, the company had 599,000 BTC, which decreased by 12,000.
Grayscale has transferred a total of 31,638 BTC to Coinbase addresses, including today’s transfers. This figure includes transfers from the last few minutes.
Will Cryptocurrencies Plunge to the Bottom?
The decrease of nearly 600,000 reserves to 587,532 suggests that more BTC could be sold over-the-counter. This indicates that while GBTC reserves shrink, more BTC is being pumped into the markets (even if not in response to spot demand), meaning the supply for sale is increasing. Yesterday’s transfer of 9,000 BTC was worth $380 million and caused the BTC price to drop rapidly.
GBTC applies a high fee of 1.5%. In contrast, competitors like BlackRock‘s iShares Bitcoin Trust charge fees as low as 0.25%, with a significant portion adopting a zero-fee policy for a 6-month period (or up to $1-5 billion in volume). At this stage, it almost seems certain that GBTC sales will continue.
Bitcoin analyst Dylan LeClair said;
“Expect a large number of redemptions to be converted back to other ETFs in the coming days/weeks due to the fee difference, resulting in some selling pressure.”
Investors who bought GBTC in February 2023 and earned 47% just from the negative premium are now seeing a multiplier effect on their gains with the rise of BTC. It seems that the issue of shrinking GBTC reserves will continue to be one of the pressures on the market in the coming days.
