GBTC Outflows Overpowered by ETF Inflows, BlackRock's IBIT Surpasses $10 Billion AUM

Outflows from the Grayscale Bitcoin Trust (GBTC) experienced a notable spike on Thursday, with a total of $599 million exiting the trust, nearly three times the redemption seen on the previous day and marking the largest single-day outflow since January 22. Arkham Intelligence corroborated this data by revealing that Grayscale transferred almost 10,000 bitcoins to the Coinbase Prime crypto exchange, presumably for selling, as the U.S. markets opened on Friday morning.

This substantial outflow might indicate that Genesis, a crypto lender, initiated or intensified the unloading of its GBTC holdings, capitalizing on the surge in bitcoin's value. While Genesis had received bankruptcy court approval on February 14 to sell 35 million GBTC shares, valued at $1.3 billion then and approximately $1.9 billion now, the outflows from GBTC had been relatively subdued over the past two weeks until the sudden spike on Thursday.

This episode of GBTC outflows resembled the situation in mid-January, when the bankruptcy estate of the collapsed crypto exchange FTX sold about $1 billion worth of shares. Notably, Grayscale's GBTC, previously operating as a closed-end fund without redemptions, underwent conversion to a spot ETF in January. During the crypto bear market in the preceding two years, its shares traded at a significant discount to net asset value, which dissipated during the rally leading up to and following the ETF conversion.

Despite the substantial GBTC outflows, inflows into the other nine U.S.-listed spot bitcoin exchange-traded funds were more than sufficient to offset the sales from GBTC on Thursday. BitMEX Research reported a net inflow of $92 million into these alternative ETFs, though this marked the lowest in a week.

In parallel news, BlackRock launched a Spot Bitcoin ETF in Brazil, expanding trading on its iShares Bitcoin Trust ETF (IBIT) after gaining approval from the U.S. Securities and Exchange Commission (SEC) just seven weeks earlier. BlackRock's IBIT has witnessed remarkable success, surpassing $10 billion in assets under management (AUM) and accumulating over 161,000 BTC. Both BlackRock and Fidelity now collectively own 265,354 BTC, amounting to $16.3 billion, through their spot Bitcoin ETFs.

Despite the lower net inflows in the broader market on Thursday, BlackRock's IBIT continued to attract significant investment, recording an impressive $604 million in fresh funds and acquiring over 9,700 bitcoins. This came on the heels of a record-breaking Wednesday for the fund.

The narrative of strong buying pressure through spot bitcoin ETF demand has been a key theme in recent weeks, coinciding with Bitcoin's price rally, which exceeded $60,000 for the first time since November 2021. Bitcoin's impressive 44% gain in February underscores the impact of the spot Bitcoin ETF market on overall market dynamics.

On February 29, Matt Hougan, Chief Investment Officer at Bitwise Asset Management, discussed the flourishing spot Bitcoin ETF market on CNBC's "Squawk Box." Initially predicting Bitcoin to reach new all-time highs above $80,000 in 2024, Hougan now considers these estimates conservative, given the current ETF trends and overwhelming demand. He suggests that Bitcoin could potentially reach $100,000, $200,000, or even higher, citing significant supply-demand dynamics and the upcoming halving event in April, which will further reduce new Bitcoin supply.