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Analysts now blame massive outflows from the Grayscale Bitcoin Trust (GBTC) for recent headwinds on the uptrend of Bitcoin price – but how long will BTC outflows pressure price action?
GBTC, which, before the approval of spot Bitcoin exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) in January, was a popular vehicle for institutions seeking BTC exposure, is currently unwinding the product and converting it into a spot Bitcoin ETF in alignment with a court ruling.
Bitcoin Price Under Pressure: Grayscale’s GBTC Outflows Stall Rally
Even so, this conversion has an unintended consequence for Bitcoin price and recent upside momentum in the charts.
As GBTC sells more Bitcoin, the upside momentum slows down due to the temporary jump in supply, keeping Bitcoin price below the all-time high of around $73,737.
Lookonchain data shows that Friday was the fourth consecutive day of net negative flows for US-listed spot Bitcoin ETFs, with GBTC leading the outflow charge.
On Friday alone, GBTC saw a staggering $372 million outflow, contributing to $155.4 million for the entire fund group – and worsening the picture, amid the outflow, BlackRock added $226 million of Bitcoin, pushing their total haul to over 242,000 BTC.
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While BlackRock and top spot Bitcoin ETF issuers, including Fidelity and Ark 21Shares, continue to add more Bitcoin, there has been continued outflow over the past week. Indeed, by March 22, the 7-day net inflow stood at 8,179 BTC, or -$516.7 million.
As expected, accelerated redemption across these funds coincided with BTC dropping to as low as $62,300 on Friday before prices stabilizing over the weekend.
Coinbase Institutional analysts speculate that Genesis, the bankrupt crypto lender, and a Digital Currency Group (DCG) subsidiary, might be liquidating its GBTC holdings.
The exact amount of GBTC held by the bankrupt lender remains unknown – however, if Genesis is unwinding at spot or over-the-counter exchanges, its decision could have a domino effect on Bitcoin price.
Rise of Spot Bitcoin ETFs: Will BlackRock’s IBIT Flip GBTC?
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The good news for BTC holders, and BTC prices by extension, is that GBTC is liquidating more coins – by Friday, GBTC controls 355,759 BTC, liquidating 5,900 BTC from Thursday.
At this level, Grayscale has liquidated roughly half of its total haul from January 2024. While they sell, other issuers, including BlackRock, have been accelerating their purchase on behalf of clients, according to their Bitcoin under management – suggesting spot Bitcoin ETFs are buying the dip.
Once Grayscale completely unwinds its GBTC and converts into a spot Bitcoin ETF, BTC prices will likely rally even higher, breaking above $74,000 – especially with the impending BTC halving event in April (which will reduce the supply of new BTC by -50%).
The upcoming halving event perhaps hints at the motivation behind Grayscale’s sudden sell-off move, with the firm keen to fully reposition as a spot Bitcoin ETF before the supply shock event.
For now, if the outflow from GBTC is accelerated, BlackRock could be the largest BTC holder among all spot BTC ETFs in the United States.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
