GBTC is going big. The Grayscale Bitcoin Trust (GBTC) saw its first net inflow since its conversion to a spot ETF! Have we simply entered a more bullish paradigm, or is there an alternative explanation for this unexpected influx?
Bitcoin was much less institutionalized during the last bull run, but investors could still leverage GBTC to gain exposure to BTC through a traditional brokerage account.
At that time, net new purchases were restricted to qualified investors and subject to a lock-up period – initially 12 months, later reduced to 6 months – before these shares could be sold on the market, resulting in the shares trading at a massive premium to net. asset value (NAV) as retail investors feverishly sought to imitate BTC through a convenient and regulated route.
Unfortunately for holders, this premium turned into a discount as demand for BTC declined towards the end of February 2021, with the instrument's lack of redemption ability preventing its market price from converging towards the net asset value.
Friday's inflows ended the nearly 80-day outflow streak that GBTC had experienced since the buyback was activated when converting to a spot ETF and This was the first time Grayscale purchased BTC for this product since the premium closed over three years ago!
For the first time, the 1D circulates entirely in green, no red for the Bitcoin Bunch. I'm not going to hype football like some did during the runaway period, but I will point out that over 95% of ETF investors HOLDED during what was a pretty nasty and persistent downturn. Will the same thing happen next… pic.twitter.com/3l3uwwmqGy
– Eric Balchunas (@EricBalchunas) May 6, 2024
GBTC's strong performance coincided with simultaneous inflows into all BTC spot ETFs, contrasting sharply with Wednesday's record outflow day, when all products saw simultaneous outflows.
It is evident that BTC price movements are the main drivers of spot ETF flows, with Wednesday's outflows coinciding with BTC's fall below $60,000 and Friday's inflows aligned with a sudden rise in its price, and it seems likely that they will remain the predominant factor behind the ETF. the flows advance.
While bulls hope that GBTC's ability to reverse the trend of outflows could indicate that the instrument has found a natural equilibrium, the presence of a single day of entry is insufficient to confirm this speculation: there is little meaning behind this one-off event without continuation. in GBTC flows.
Given GBTC's high 1.5% management fee, six times higher than most issuers, it is often considered one of the best methods for shorting BTC.
While it is conceivable that the shares were created with the intention of lending them to short sellers, the wide availability of GBTC shares for borrowing supports the idea that it may actually be a bullish surge.
I also suspected it $GBTC inflows today were origination activity (prime brokers creating new shares for the purpose of lending to short sellers), but in speaking with a large PB they indicated that GBTC is still very easy to borrow… which means this could actually be bullish inflow https://t.co/QAP6oTfTXP
– KΞΞGAN (@zeroxkeegan) May 4, 2024