Grayscale Cuts Down on Bitcoin Sales, “Starting to Reach Equilibrium”

After months of investor selling, Michael Sonnenshein, CEO of crypto asset manager Grayscale Investments, has indicated that outflows from the Grayscale Bitcoin Trust (GBTC.P) may be reaching a balance point.

In a recent interview with Reuters on Inside ETFs, Sonnenshein shed light on the evolving dynamics of the bitcoin exchange-traded fund (ETF) market. Grayscale has been grappling with maintaining its dominance in the bitcoin ETF market amidst the emergence of offerings from nine other issuers in January. This development followed a long-standing battle with the U.S. Securities and Exchange Commission (SEC), which finally approved the launch of these products after a decade-long tussle with the crypto industry.

Nonetheless, despite facing total outflows exceeding $15 billion from the Grayscale Bitcoin Trust (GBTC) in the last three months, Sonnenshein highlighted that the surge in bitcoin’s value has helped mitigate the impact, with Grayscale’s assets under management dipping only slightly to $23.13 billion.

“We do believe that the fund has started to reach a little bit of an equilibrium where some of those anticipated outflows, whether it was some of the bankruptcy selling, some investors perhaps undertaking switch trades, (are) largely behind us,” Sonnenshein remarked.

A significant portion of these outflows was attributed to selling linked to the bankruptcy settlements of FTX and other defunct crypto companies, as well as investors selling the Grayscale ETF only to immediately buy another. However, the full extent of these flows has yet to be reflected in data.

While daily outflows have decreased from their peak in March, they remain in negative territory, with Grayscale witnessing outflows of $303 million on Monday, according to BitMEX Research.

Looking ahead, Sonnenshein hinted at Grayscale’s plans to compete with newer rival offerings from companies like BlackRock and Fidelity. In fact, Grayscale recently announced its intention to seek approval from the SEC to spin off a portion of the ETF’s assets into a new, lower-fee Bitcoin Mini Trust. However, the specifics of these fees are yet to be disclosed.

Sonnenshein acknowledged the competitive fee landscape, with Grayscale currently levying a 1.5% percentage fee on its converted ETF, substantially higher than the average fee charged by most newer rivals.

Despite these challenges, Sonnenshein expressed optimism about the future, with hopes of winning SEC approval to convert another Grayscale product into a spot ether ETF. He emphasized Grayscale’s ongoing legal battle with the SEC and the potential for regulatory approval to usher in new opportunities for the company and the broader crypto market.

It is worth noting that Grayscale has sold over 300,000 BTC, while still holding a remarkable 315,931 BTC as of April 11, from their initial ownership of 619,162 BTC.

Moreover, Grayscale’s commitment extends beyond Bitcoin to encompass Ethereum and Ethereum Classic, offering investors opportunities through their Ethereum Trust valued at $7.2 billion and Ethereum Classic Fund valued at $281.3 million as of January 18, 2024. However, Grayscale’s reach doesn’t end there. With a holistic focus on the digital currency market, Grayscale provides investment avenues for several cryptocurrencies, demonstrating their dedication to catering to diverse investor preferences and embracing the evolving landscape of digital assets.

Drawing attention to the distinction among various trading funds, Grayscale had a closed Bitcoin fund since 2013, containing approximately 617,000 Bitcoins. With approval from the Securities and Exchange Commission (SEC), this fund transitioned into a trading fund, marking a significant opportunity for investors to gain profits.

In essence, this development suggests a potential stabilization in investor sentiment towards the Grayscale Bitcoin Trust, reflecting maturity of investor behavior in the digital currency space.

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