US-based Bitcoin spot ETFs appear to be losing steam as they experienced their most significant daily withdrawal since their inception this past Tuesday.
The collective outflows from these ten funds amounted to $326 million, equivalent to 5,117 BTC. This marked the second consecutive day of withdrawals, following a $154.4 million loss (2,293.1 BTC) on Monday.
Why Are Bitcoin Spot ETFs Experiencing Withdrawals?
The Grayscale Bitcoin Trust (GBTC) was solely responsible for the outflows on both days, leading to a staggering $1.086 billion worth of Bitcoin exiting the fund this week. Monday was particularly harsh for GBTC, as it saw its worst day as an ETF with $642.5 million in assets leaving the fund.
Although the iShares Bitcoin Trust (IBIT), Grayscale’s primary competitor, offset some of GBTC’s sell-off with $451.5 million in inflows on Monday, it only managed to attract $75.2 million on Tuesday, marking one of its least successful days since its inception.
Apart from Fidelity and Bitwise, no other Bitcoin ETF recorded net inflows.
The last occurrence of back-to-back net outflow days for Bitcoin spot ETFs was shortly after their debut in January when investors „sold the news“ following their eagerly awaited launch.
At that time, Bitcoin’s value dropped from $49,000 on the day of the launch to $39,000 in less than two weeks. Similarly, Bitcoin’s price has recently fallen from $74,000 last week to $64,000 at the time of writing, following a slowdown in ETF inflows on Friday.
Exploring Grayscale’s Withdrawals
Glassnode, an on-chain data analysis firm, suggests that such pullbacks are typical in Bitcoin bull markets, as long-term holders begin to sell their coins after securing substantial paper gains.
Since December, Glassnode reports that over 700,000 BTC have left the possession of long-term holders, with 60% of this exodus attributed to Grayscale.
„Taking a breather, correcting, and/or consolidating at this point makes perfect sense for the market, allowing it to absorb the recent movements,“ stated Glassnode’s lead analyst James Check this past Sunday.
Grayscale has not seen a day of net inflows since January 11. As older investors cash out with profits, new Bitcoin investors find little appeal in the fund compared to newer options with significantly lower management fees.
„Those exiting are pre-ETF investors, not newcomers,“ observed Bloomberg ETF analyst Eric Balchunas on Twitter this Wednesday.
In a recent interview, Grayscale CEO Michael Sonnhenshein mentioned that GBTC would gradually reduce its management fee. The fund has also applied to introduce a „mini“ Bitcoin ETF, which is expected to have a lower fee than its main fund.
