The Spot Bitcoin (BTC) exchange-traded fund (ETF) product debuted on January 12th. The first trading session was somewhat confusing as investors had no idea what the actual inflow amounts were and market makers themselves faced various problems with the liquidation schedule for each financial instrument. Still, the Bitcoin spot-based ETF's $4.66 billion in volume was an all-time high in traditional finance, but is this enough to justify a rise in Bitcoin prices above $47,000? ?
Grayscale's GBTC outflows will offset most of the industry's inflows
Some criticism has surfaced about Grayscale GBTC, which previously existed as a trust fund and managed more than $27 billion worth of BTC. In his first three trading days alone, this product generated a net outflow of $1.17 billion for him. Most of that movement occurred on January 13th and January 16th, offsetting 86% of inflows to other Spot Bitcoin ETFs during this period. In absolute terms, this equates to a total of $157 million in net inflows for him over two days.
Most of the $782 million in net inflows highlighted in data originally presented by Bloomberg ETF senior analyst Eric Balchunas occurred in the first trading session. Due to different settlement times, the arbitrage desk could not let him exit his GBTC position on January 12th. For example, he could have offset a short (negative) position in CME Bitcoin futures with a long (positive) position in GBTC and made a profit. The discount at which fund shares were traded prior to spot ETF approval.
Critics are correct to infer that most of the Spot Bitcoin ETF's inflows are combined with outflows from Grayscale GBTC, but even if you exclude the first trading day, the BlackRock-issued product has There is a total net inflow of $157 million over the two days. Fidelity, Bitwise, Ark/21Shares, Invesco, and his other ETFs. The question for investors to consider is whether the exit from GBTC will continue and whether total net inflows will be sustainable in the long term.
Assuming the same pattern continues next month, it would mean that GBTC would experience net outflows of $11.3 billion while the remaining spot ETF candidates would receive net inflows of $13 billion. What impact do we expect his $1.7 billion growth in spot Bitcoin exchange-traded funds to have on price? These ETFs traded a combined $1.9 billion on January 16th alone, so from a trading perspective, this number seems completely irrelevant.
There is no doubt that there will be continued demand for Spot Bitcoin ETFs
Traders tend to confuse volume with flow because buyers and sellers always match in any financial market. But whether sellers are simply closing out positions taken earlier in the day, or whether buyers are taking advantage of arbitrage opportunities and taking opposite trades in the derivatives market or another exchange. It's impossible to know.
Related: VanEck to delist Bitcoin Strategy ETF due to performance and investor interest
One thing is for sure: given that Grayscale GBTC charges 1.5% compared to other competitors' fees of 0.25% or less, investors are likely to gradually shift their holdings. That means it's expensive. So whether it takes 20 or 120 days for GBTC holdings to stabilize at a certain level and this movement somehow reaches a plateau, investors will have 2 days to collect the remaining $157 million. We should pay attention to who buys it.
I think it will be very interesting to see how the market continues to absorb the GBTC selloff.
Someone is buying it.
— Byzantine General (@ByzGeneral) January 17, 2024
X social network user “Byzantine General” asked this very question on January 17th, suggesting that there is real and continued demand for spot Bitcoin ETFs. At current price levels, Bitcoin miners are receiving $76.1 million worth of newly minted coins every two days, so the spot ETF's recent net inflows have exceeded its value by just 2x. . Furthermore, whatever the resulting price impact will be, it will change dramatically after the Bitcoin halving in April.
It seems premature to think that marginal spot ETF purchases will continue to offset net outflows from the Grayscale GBTC fund, as the data favors a decline in total assets under management for the industry, including CME's Bitcoin futures open interest. It can be easily migrated. Still, Bitcoin bulls believe that as investors realize the halving effect on Bitcoin's supply side, GBTC holdings will eventually be depleted or absorbed, leading to a bull run above $47,000. We can rejoice that the path is now open.
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.
