Bitcoin[BTC]has fallen over 15% since the launch of spot exchange traded funds (ETFs) last week, with billions in assets flowing out of Grayscale's GBTC. While some of those billions came from investors switching to lower-fee ETFs and another portion from investors taking profits from the absolute price rise of GBTC (and Bitcoin), at least some of that money is due to traders out exited a likely very profitable bet that GBTC's discount to net asset value (NAV) would narrow.[BTC)hasdroppedover15%sincetheinaugurallaunchofspotexchange-tradedfunds(ETFs)lastweekwithseveralbillioninassetsflowingoutofGrayscale'sGBTCWhileachunkofthosebillionhasbeenfrominvestorsmovingtolowerfeETFsandanotherchunkfrominvestorstakingprofitsonGBTC's(andbitcoin's)absolutepriceriseatleastsomeofthatmoneyisduetotradersexitingwhat'slikelybeveryprofitablebetthatGBTC'sdiscounttonetassetvalue(NAV)wouldnarrow[BTC)hasdroppedover15%sincetheinaugurallaunchofspotexchange-tradedfunds(ETFs)lastweekwithseveralbillioninassetsflowingoutofGrayscale’sGBTCWhileachunkofthosebillionshasbeenfrominvestorsmovingtolowerfeeETFsandanotherchunkfrominvestorstakingprofitsonGBTC’s(andbitcoin’s)absolutepriceriseatleastsomeofthatmoneyisduetotradersexitingwhat’slikelybeenaveryprofitablebetthatGBTC’sdiscounttonetassetvalue(NAV)wouldnarrow
“It appears that GBTC investors who purchased the GBTC fund at a significant discount to NAV last year to position for the eventual ETF conversion took full profit following the ETF conversion “by completely withdrawing from the Bitcoin space rather than moving to cheaper spot Bitcoin ETFs,” analysts led by Nikolaos Panigirtzoglou wrote.
Before GBTC was incorporated into an ETF by a trust, it was one of the few ways for U.S. stock traders to participate in Bitcoin's price movements without having to purchase the actual cryptocurrency. This made it the largest regulated Bitcoin fund in the world in terms of AUM. The bank had previously estimated that up to $3 billion would be invested in GBTC in the secondary market in 2023 to take advantage of the trust's discount to net asset value. If this estimate is correct, and with $1.5 billion already outflowed, another $1.5 billion could exit the range via profit-taking on GBTC, putting further pressure on Bitcoin prices in the coming weeks . These outflows are also putting pressure on GBTC to lower its fees, the report said, adding that “GBTC’s 1.5% fee still appears too high compared to other spot Bitcoin ETFs that “Much more capital, perhaps an additional $5 billion to $10 billion, could leave GBTC if it loses its liquidity advantage,” the bank warned. As of Friday, GBTC is the most expensive ETF among ETFs, with some charging no fees for the first six months or until a certain amount of assets under management (AUM) is reached.
According to JPMorgan, other spot Bitcoin ETFs (except GBTC) recorded $3 billion in inflows in just four days, which is comparable to inflows in previous Bitcoin launches. The bulk of these $3 billion inflows reflects a rotation from existing Bitcoin vehicles such as futures-based ETFs, the report added.
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