Bitcoin Faces Downward Pressure as Grayscale Bitcoin Trust Investors Exit Post-ETF Launch

After the recent launch of spot exchange-traded funds (ETFs), Bitcoin (BTC) experiences a sharp decline, falling more than 15%. According to a study report released by the banking behemoth JPMorgan (JPM), during this market move, almost $1.5 billion has been taken out of the Grayscale Bitcoin Trust (GBTC).

Leading analysts, Nikolaos Panigirtzoglou included, point to a noteworthy pattern among GBTC investors. Individuals who had purposefully purchased GBTC at a significant discount to Net Asset Value (NAV) with the intention of eventually converting it into an ETF are now choosing to realize their whole profit. Rather from switching to more affordable spot Bitcoin ETFs, many investors are opting to completely leave the Bitcoin market.

GBTC was a major way for U.S. stock traders to be exposed to the price swings of Bitcoin without actually owning the cryptocurrency until it was uplisted to an ETF from a trust structure. The trust was essential since it was the largest regulated Bitcoin fund in the world by Assets Under Management (AUM).

Potential Impact on Bitcoin Prices and GBTC Fees

In order to take advantage of the trust’s discount to NAV, JPMorgan had previously calculated that about $3 billion had been invested in GBTC in the secondary market over the course of 2023. The research indicates that, in addition to the $1.5 billion that has already been removed, a further $1.5 billion may leave the market as a result of profit-taking on GBTC. In the next weeks, this trend may put more downward pressure on Bitcoin prices.

Furthermore, the withdrawals are drawing attention to GBTC’s costs, which are at 1.5%. According to JPMorgan, this cost seems excessive when compared to other spot Bitcoin ETFs, which might lead to more investor withdrawals.

The study includes a warning note stating that a larger capital outflow of between $5 billion and $10 billion may occur soon if GBTC loses its edge in liquidity. According to the most recent statistics, GBTC is the most costly ETF compared to its rivals. Some of its rivals pay no fees for the first six months or until a certain amount of Assets Under Management (AUM) is reached.

JPMorgan emphasizes that in just four days, significant inflows of $3 billion have been observed in other spot Bitcoin ETFs, with the exception of GBTC. This influx is a noteworthy trend in investor behavior after recent Bitcoin product debuts, and it reflects a move away from current Bitcoin vehicles, especially futures-based exchange-traded funds (ETFs).