In the aftermath of the inaugural launch of spot exchange-traded funds (ETFs) last week, Bitcoin (BTC) has experienced a notable decline of over 15%. A research report from JPMorgan reveals that a substantial $1.5 billion has flowed out of the Grayscale Bitcoin Trust (GBTC), potentially signaling a significant shift in investor behavior post-ETF conversion.
The report suggests that investors who had been purchasing GBTC at a considerable discount to its Net Asset Value (NAV) over the past year, positioning for its eventual ETF conversion, are now capitalizing on profits. Instead of transitioning to more cost-effective spot Bitcoin ETFs, these investors are choosing to exit the Bitcoin space entirely. GBTC, previously one of the primary avenues for U.S. stock traders to gain exposure to Bitcoin’s price movements without owning the cryptocurrency, had become the world’s largest regulated Bitcoin fund by Assets Under Management (AUM) before its uplisting to an ETF.
JPMorgan had previously estimated that around $3 billion was invested in GBTC in the secondary market during 2023 to leverage the trust’s discount to NAV. With $1.5 billion already outflowed, the report anticipates an additional $1.5 billion may exit as investors take profits from GBTC, exerting further downward pressure on Bitcoin prices in the coming weeks.
The report also underscores the impact of these outflows on GBTC’s fee structure, noting that the current fee of 1.5% appears high in comparison to other spot Bitcoin ETFs. JPMorgan warns that a liquidity disadvantage could prompt even more substantial capital outflows, potentially ranging from $5 billion to $10 billion. As of the latest assessment, GBTC holds the title of the most expensive ETF among its counterparts, with competing ETFs offering zero fees for the initial six months or until a specified Assets Under Management (AUM) target is achieved. The report highlights that other spot Bitcoin ETFs, excluding GBTC, have attracted $3 billion in inflows within just four days, comparable to the inflows witnessed during previous Bitcoin product launches. Notably, much of this inflow is attributed to a rotation from existing Bitcoin vehicles, such as futures-based ETFs.