Grayscale has offloaded $2.14b in BTC since ETF approval

Grayscale Investments has sold over $2.14 billion in BTC following the SEC’s approval of spot Bitcoin ETFs.

According to a Jan. 22 post by crypto analytics platform Lookonchain, Grayscale’s Bitcoin holdings have diminished by about 52,227 BTC, equivalent to $2.14 billion, following the SEC’s recent approval of spot Bitcoin ETFs earlier this month.

Grayscale currently possesses 566,973 BTC, with a value of $23.21 billion. In contrast, iShares (BlackRock) has 33,431 BTC valued at $1.37 billion, Fidelity holds 24,857 BTC worth $1.02 billion, and Bitwise’s holdings include 10,152 BTC, equivalent to $415.6 million.

This decision by Grayscale is particularly notable in light of the SEC’s recent wave of approvals for various spot Bitcoin ETFs on Jan. 10. Financial giants like ARK Invest, BlackRock, VanEck, WisdomTree, Fidelity, Invesco, Franklin Templeton, Bitwise, and Valkyrie have all received the nod. Grayscale Investments itself was authorized to convert its $28 billion Bitcoin trust into the GBTC spot ETF at the end of November last year, marking a pivotal change in the investment landscape.

The cryptocurrency community is actively debating Grayscale’s rationale for reducing its Bitcoin exposure. Analysts speculate that the green light for spot Bitcoin ETFs may have influenced Grayscale to realign its assets strategically, leveraging the growing institutional interest in the cryptocurrency sector.

Historically, GBTC has been a substantial accumulator of Bitcoin, primarily due to its practice of settling redemptions in USD rather than liquidating its BTC holdings. However, this strategy shifted following the introduction of Bitcoin spot ETFs.

Analysts pinpoint two main reasons for investors withdrawing from GBTC. The first is Grayscale’s 1.5% annual management fee, which is notably higher than that charged by most ETF issuers. The second reason is the change in the pricing structure of GBTC shares.

Many investors initially bought shares at a significant discount, which peaked at 49% in January 2023. However, with the discount now nearly eliminated, standing at 0.27%, these investors are exiting their positions in search of more lucrative or stable options.

This situation has led Grayscale to sell off its BTC holdings to satisfy the redemption demands of departing investors. Nikolaos Panigirtzoglou, managing director of global markets strategy at JP Morgan, highlighted in a LinkedIn post on Jan. 19 that up to $3 billion had been invested into GBTC in 2023 to capitalize on the discount to NAV.

At that time, he further noted that if the $3 billion estimate holds true, and considering $1.5 billion has already been withdrawn, an additional $1.5 billion could exit the Bitcoin space, potentially exerting further pressure on Bitcoin prices in the upcoming weeks.

Amid these developments, the broader Bitcoin market is showing a lack of momentum. The current price of Bitcoin is $40,735, reflecting a 2.42% decline over the last 24 hours and a 6.8% decrease over the past month.

Grayscale’s substantial sell-off, combined with the ongoing market trends, raises questions about the future valuation of Bitcoin and how major institutional players will position themselves in the continually evolving cryptocurrency landscape.