Bitcoin ETF AUM Flippening: Grayscale GBTC Outflows Set Stage For Cheaper Competitor Overtake?

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Last updated Mar 05, 2024 | 10:23 AM UTC

Amid tricky market conditions, institutional investors are making major moves with their Spot Bitcoin exchange-traded funds (ETFs).

Today, 23 January 2024, Grayscale Bitcoin Trust (GBTC) records over $640million in outflow as other ETFs record positive inflow.

Bad day for Bitcoin

Spot Bitcoin (BTC) ETFs have had a “bad day” according to Bloomberg ETF analyst, James Seyffart, who posted new data to Twitter earlier today. According to his findings, the largest ETF provider has seen an outflow of $640m today. 

GBTC also entered the market with around $28billion in assets under management (AUM), a figure that has toppled to around $21bn at the time of writing.

James Seyffart BTC tweet

As per the data, GBTC has shed almost $3.45bn in the past week. Meanwhile, other spot BTC ETFs appear to be making relatively healthy gains, with Blackrock’s iShares Bitcoin Trust (IBIT) seeing its third-largest day of positive inflow to date, drawing in around $272m according to Seyffart’s data.

James Seyffart tweet

With such a significant sum in AUM, it may be unlikely that GBTC will lose its top spot any time soon. If anything, continued outflow of this size from GBTC would likely have a rather negative effect on the price of Bitcoin and the broader market, but there doesn’t seem to be an end in sight for GBTC outflow volumes.

ETF flippening?

A comprehensive breakdown of the data from BitMEX research appears to suggest that the spot BTC ETF market may be experiencing a flippening of its own, with the once-dominant GBTC posting unceasing outflows since they began trading.

Total product flow

This data also aligns with data from BitMEX Research with a small margin of difference, with IBIT gaining $260.6m on day seven of trading. 

But as you can see, whilst GBTC may remain the largest in terms of AUM, this could be about to shift. As noted by BitMEX, Blackrock, Fidelity, Bitwise, and other providers are experiencing positive product inflow, whilst billions of dollars leave GBTC.

BitMAX Research Spot BTC ETFs
The seventh day of trading saw a total outflow of approximately $87m from all providers, though this figure is greatly affected by GBTC’s outflow. It’s worth noting that Blackrock’s IBIT and Fidelity Wise’s FBTC have a combined inflow of over $3bn, offsetting a lot of the damage done by GBTC to these metrics.

Cheaper Spot BTC ETF

As we have previously reported, this may be the result of GBTC having the highest fee structure of all the providers, which stands at 1.5%, and this may contribute have speculators thinking that traders now want to shore up their investment somewhere cheaper like IBIT which has a fee of 0.25%. But this may not be as simple as investors switching to a cheaper spot BTC ETF.

A JPMorgan analyst Nikolaos Panigirtzoglou explained last Friday in a LinkedIn post: “The $1.5bn outflow from the Grayscale's GBTC fund in particular has acted as a drag. It looks like GBTC investors who over the past year had been buying the GBTC fund at a significant discount to NAV to position for its eventual ETF conversion, have been taking full profit post ETF conversion by exiting the bitcoin space entirely rather than shifting to cheaper spot bitcoin ETFs.”

Considering that the price of BTC has indeed tumbled even further since may be concrete evidence that ETF investors aren’t switching providers and are instead exiting the market entirely.

The FTX effect

It has been argued that the ongoing debacle of now-bankrupt crypto exchange FTX has had a suppressive grip on BTC. As per some reports, FTX selling its GBTC shares may be the sole reason that GBTC, and BTC for that matter are underperforming.

Matthew Dixon tweet
It is no secret that FTX held 22.3 million GBTC shares which were valued at around $597m in late October 2023. Though reports are suggesting that these have now been sold for around $780m at today’s value, Naturally, a sale of this size could have a novel effect on the overall market, which may again explain its current state.

At the time of writing, BTC is trading below $39k, and hundreds of billions have been wiped off the total crypto market cap in the last 24 hours, according to CoinMarketCap

BTC daily chart
 

Written by

Eddie is a seasoned crypto writer and Bitcoin maximalist.