Mass Exodus: $1.1 Billion Swiftly Leaves GBTC In 72 Hours Amidst ARK’s In-House Bitcoin ETF Acquisition

Over the past three days of trading, approximately $1.1 billion has been withdrawn from Grayscale’s spot Bitcoin exchange-traded fund (ETF) as investors hurriedly exited the fund following its discount narrowing to the lowest level in nearly three years.

On Jan 16 alone, an estimated $594 million in outflows was reported, per a post on X (formerly Twitter) by Bloomberg ETF analyst James Seyffart.

Seyffart noted the influx of funds from recently introduced Bitcoin ETFs but remained uncertain whether these inflows surpassed the outflows from the Grayscale Bitcoin Trust (GBTC) on Jan 16.

“While most other funds experienced positive inflows, there is skepticism about whether it’s sufficient to counterbalance the nearly $600 million outflow from GBTC.”

Seyffart and other analysts observed potential inconsistencies in flow calculations arising from the customary accounting and settlement procedures associated with share trading.

Over several years, GBTC presented a lucrative opportunity for investors who leveraged funds to participate in the fund and subsequently capitalized on the Grayscale premium. The premium peaked at 43% in July 2019, as indicated by YCharts data.

The distinctive GBTC arbitrage opportunity dissipated when the premium unexpectedly turned into a discount in Feb 2021. With a mandatory six-month lock-up period for investors acquiring GBTC shares, numerous individuals trapped in the fund are reluctant to offload their shares at an increasingly deteriorating discount.

In Dec 2022, the discount on GBTC dropped to a minimum of 48.9%. Source: YCharts

Since the transformation of GBTC into a spot ETF, the discount has reached a minimum of 1.55%, prompting investors who had their funds locked up for prolonged periods to exit.

The estimated outflow of $1.17 billion from GBTC translates to approximately 27,000 Bitcoin, considering its current price of roughly $42,800.

ARK Invest’s ARKB Surges: Fifth Largest Bitcoin Holding In Spot ETF

Excluding GBTC, the nine other spot Bitcoin ETF issuers collectively hold 35,761 Bitcoin, as reported by X account CC15Capital.

In addition to Grayscale’s holding of 605,891 Bitcoin, BlackRock’s and Fidelity’s ETFs have recorded holdings of 11,439 and 9,750 BTC, according to data from CC15Capital.

Nevertheless, each ETF provider may need to update the current Bitcoin assets.

In the meantime, ARK Invest, led by Cathie Wood, has initiated the accumulation of its newly sanctioned ARK 21Shares Bitcoin ETF (ARKB). Concurrently, it divested its holdings in the Proshares Bitcoin Strategy ETF (BITO) and other technology-focused assets within its ARK Next Generation Internet ETF.

Presently, ARKB possesses 2,535 Bitcoins valued at over $109 million, marking the fifth-largest Bitcoin holding among the 10 spot Bitcoin ETFs providers.

Related Reading | Bitcoin Slides Below Key Average, Sparks Correction Worries

The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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