Crypto Fund Exodus: Higher-Cost Issuers Lose $2.9 Billion As Spot Bitcoin ETFs Attract Massive Inflows

A recent report by CoinShares revealed that higher-cost crypto fund issuers in the United States have experienced a significant outflow of $2.9 billion since the new spot Bitcoin ETFs hit the market.

Growing Dominance Of Bitcoin ETFs

Per the report, while experiencing minor outflows of $21 million last week, digital asset investment products showed significantly high trading volumes amounting to $11.8 billion. 

This surge in trading activity underscores the growing dominance of exchange-traded products (ETPs) and highlights their significant impact on the overall market.

Incumbent higher-cost issuers in the United States bore the brunt of the outflows, with $2.9 billion exiting their funds. In contrast, as seen in the chart below, newly issued Bitcoin ETFs garnered $4.13 billion in inflows since their launch. 

This trend indicates a clear preference for the “cost-efficient” such as Blackrock of Fidelity’s options offered by their newly established spot-based Bitcoin ETFs.

The report also adds that altcoins faced challenges during this period, with Ethereum (ETH) and Solana (SOL) witnessing outflows of $14 million and $8.5 million, respectively. 

Notably, blockchain equities continued to attract significant inflows, totaling $156 million. These investments have led to a cumulative nine-week run totaling an impressive $767 million, indicating growing confidence in blockchain-related companies.

Regionally, the United States attracted inflows of $263 million, while Canada and Europe witnessed outflows of $297 million. This suggests a minor migration of assets to the United States, where fees are currently more competitive.

FTX And Grayscale’s Bitcoin Sale

Asset manager Grayscale has once again transferred a substantial amount of Bitcoin to its ETF custodian, Coinbase, exacerbating the selling pressure that has resulted in a significant price correction of over 9% since the approval of Bitcoin ETFs on January 11. 

According to data from Arkham Intelligence, Grayscale has transferred an additional 15,560 BTC to Coinbase, further adding to the outflows from their holdings.

Earlier this month, it was reported that Grayscale initiated the first batch of BTC outflows from their holdings to Coinbase, totaling 4,000 BTC (approximately $183 million) over six days. 

The asset manager resumed outflows on January 16, sending an additional 11,700 BTC (equivalent to $491.4 million) to Coinbase. On Friday, it was revealed that an additional 12,865 BTC ($529 million) were transferred from the Grayscale Trust address to Coinbase Prime. 

With the latest transfer, the total amount of BTC from the Grayscale Trust address to Coinbase reaches 69,994 BTC ($2.9 billion).

In addition to Grayscale’s outflows, recent reports highlight significant sell-offs of Grayscale’s Bitcoin Trust GBTC shares by investors. It is estimated that over $2 billion worth of GBTC has been sold, with a substantial portion originating from the FTX estate. 

The FTX estate reportedly sold 22 million GBTC shares, nearly $1 billion. This sell-off significantly reduced FTX estate’s GBTC holdings to zero.

Overall, the combined effect of Grayscale’s BTC transfers and the GBTC sell-off from investors, particularly the FTX estate, has intensified selling pressure in the Bitcoin market, despite the Bitcoin ETFs approval. 

It remains to be seen if the selling pressure from Grayscale will continue and how it will affect BTC’s price action in the coming months as the halving event scheduled for April 2024 approaches.

As of this writing, BTC trades at $40,500, down by over 2.7% in the past 24 hours and 4.3% in the past seven days. 

Featured image from Shutterstock, chart from TradingView.com