Market Impact of Grayscale GBTC's Transition to ETF

Since its establishment, Grayscale has been an important institutional investor in the cryptocurrency space. As an early trust fund providing compliant cryptocurrency investment channels for investors, Grayscale holds a significant position in the industry.

However, since GBTC transitioned to a spot Bitcoin ETF on January 11, the situation has changed dramatically. As of now, GBTC has seen a cumulative outflow of $3.45 billion, becoming the main reason for the overall net outflow of funds in Bitcoin ETFs and also the largest source of selling pressure in the short term.

From "Bull Market Engine" to Selling Pressure Sources

Grayscale was once regarded as the "bull market engine" of the cryptocurrency market. Before 2020, the market had been anticipating that a Bitcoin ETF could bring massive incremental funds to the industry. Since 2020, institutional investors like Grayscale have entered the market in large numbers, to some extent taking on this role and driving the bull market at that time.

Grayscale's trust funds primarily invest in mainstream crypto assets, with a relatively conservative investment style. These trust funds are described as "crypto currency Pi Xiu" as they only allow inflows in the short term. Investors acquire trust shares through capital contributions, indirectly increasing the demand for the corresponding cryptocurrencies, which is beneficial for the spot market.

The Negative Premium Issue and ETF Transformation

In June 2023, with the news of the spot Bitcoin ETF coming out, the negative premium of GBTC began to narrow. Prior to this, the negative premium of trust products like GBTC had once reached over 30%, causing significant losses for investors.

The root of the negative premium lies in the lack of an exit mechanism for the Grayscale Trust. Investors can only sell their shares in the secondary market after the unlock period, which often leads to losses. This is also one of the reasons why Grayscale has been actively promoting the transformation of the trust into an ETF.

Impact of ETF Transformation

After GBTC successfully transformed into an ETF, large-scale capital outflows began to occur. As of now, the largest daily outflow from GBTC has exceeded $640 million, with a cumulative outflow of $3.45 billion. In contrast, the other 10 ETFs are in a net inflow state.

GBTC accounted for more than half of the total trading volume of ETFs in the first 7 trading days. This means that the incremental funds brought in by ETFs are primarily used to hedge against the ongoing outflows of GBTC.

One of the reasons for the outflow of funds from GBTC is its high management fee. The 1.5% management fee of GBTC is much higher than the fee levels of other ETFs, which range from 0.2% to 0.9%.

Future Outlook

GBTC currently holds approximately 500,000 BTC, valued at around 20 billion dollars. In the near future, the selling pressure from GBTC may continue to suppress the willingness to invest. This will be a public game, and institutional investors may wait for the right moment to gather their chips.

Looking back, institutional investors, once regarded as the "bull market engine," have now become potential risk points. This may remind us that in this rapidly evolving industry, we should not overly rely on the布局 of large institutions, but rather view market changes more rationally.