A new market report from Bitfinex suggests that a sizable sell-off of Grayscale Bitcoin Trust exchange-traded fund (ETF) shares, partly driven by bankrupt exchange FTX, significantly impacted Bitcoin’s recent price drop in January 2024.
According to the latest market update from Bitfinex Alpha, the realization of profits following Grayscale’s successful conversion of its GBTC trust to an ETF was a significant influence on the marketwide correction that took BTC from $48,700 to $38,600 in a matter of days.
Bitfinex head of derivatives Jag Kooner unpacked the finer details of report in correspondence with Cointelegraph. Kooner emphasizes the significant “discount” afforded to GBTC investors as a primary driver for the high volume of share selling in recent weeks:
“The discount was over 50% during the bear market lows in late 2022, and it’s non-existent now because of arbitrage traders. This was one of the most expected results of spot ETFs rolling out, which means these investors have been waiting for a long time to realize these profits,” Kooner explains.
The report highlights $4.3 billion outflows following GBTC’s conversion to a spot Bitcoin ETF on Jan. 16. Conversely, the highest net inflows for an individual spot Bitcoin ETF were to BlackRock’s iShares Bitcoin Trust (IBIT), attracting $1.82 billion.
Related: Fidelity Bitcoin ETF rakes in reported $208M, offsetting Grayscale outflows alone
Bitfinex analysts also draw attention to the impact of ETF flows on the BTC price, illustrated by the fact that there was no flow of funds into the respective spot Bitcoin ETF on Saturday, Jan. 20.
Grayscale’s GBTC remains the largest Bitcoin ETF, with its total assets under management hovering around the $24 billion mark despite dropping from $28.6 billion before its conversion.
FTX sells GBTC shares as ETF fee battle begins
The Bitfinex report also notes that converting Grayscale’s trust to a spot Bitcoin ETF facilitated the sale of significant shares held by bankrupt cryptocurrency exchange FTX. FTX sold 22 million GBTC shares, valued at nearly $1 billion, completely liquidating its shares.
Another factor highlighted by Bitfinex Alpha is the impact of spot BTC ETF fees. Kooner noted that Grayscale’s competitors currently charge fees ranging from 0.2% to 0.9%, while it charges 1.5%:
“This difference in fees has incentivized investors to move their funds from GBTC to lower-cost Bitcoin ETF options. Additionally, multiple other ETF filings have waived off fees for the first year, further incentivizing a migration from GBTC to other products.”
Kooner said that investors are looking for more cost-effective ways to gain exposure to Bitcoin, which has impacted the shift of capital within the nascent Bitcoin ETF space. As January draws to a close, ETF data suggests that the movement of capital between the various ETF funds is beginning to settle.
"The daily outflows are reducing on a daily basis but are still quite high at an average of around $450 million per day. Unless there is change in fee structure, outflows are expected to continue," Kooner adds.
The Bitfinex head of derivatives concluded by highlighting that large GBTC investors who bought shares at a 50% discount over the past two years would realize profits on an earlier timeline than other investors, which is indicative of the trading behavior in January.
Magazine: Big Questions: How can Bitcoin payments stage a comeback?