Grayscale Bitcoin ETF Records First Net Inflows After $1.6 Billion Losses in 4 Months.

As of May 3, 2024, Grayscale Bitcoin Fund (GBTC), the largest Bitcoin exchange-traded fund (ETF) in terms of assets, has reported its first net inflow since the US SEC approved 10 new ETFs in January 2024. This comes after the fund experienced outflows worth $1.6 billion ahead of the Bitcoin halving.

Recording a Net Income of $63 Million After 4 Months of Consecutive Losses

On May 3, GBTC recorded a net inflow of $63 million, according to official data from the investment fund. This was the first positive net inflow for the fund since its conversion to an ETF in January, when 11 new Bitcoin ETFs were launched in the United States. At the time of writing, Grayscale maintains an active BTC balance worth $18 billion, remaining the largest Bitcoin ETF ahead of Blackrock's IBIT fund.

Several factors have contributed to GBTC's consistent outflows since its conversion to an ETF. One of the main reasons is the fund's annual management fee, which is 1.5%, considerably higher than other Bitcoin ETFs that charge less than 1%. Additionally, the selling of GBTC shares by bankrupt crypto companies such as FTX and Genesis has also fueled the outflows. FTX sold approximately $1 billion in GBTC shares, and Genesis liquidated approximately 36 million shares, valued at $2.1 billion, to purchase Bitcoin.

On May 3 itself, the broader market experienced a net inflow that totaled $378 million. Standouts included Franklin Templeton Bitcoin ETF (EZBC), which posted its largest inflow of all time, with $60.9 million, and Fidelity Bitcoin ETF (FBTC), which led the day with inflows of $102.6 million.

An End to Grayscale Bitcoin Trust (GBTC) Net Withdrawal Streak

Currently, GBTC has $18.1 billion in assets, while IBIT has reached $16.9 billion. The IBIT started with zero assets in January, while the GBTC had more than $26 billion. Although the entry is a positive sign for GBTC, the rapid growth of IBIT is putting competitive pressure.

This shift from outflows to inflows into GBTC and the broader Bitcoin ETF market has generated a sense of optimism among investors, some of whom suggest that this could be an early indicator that Bitcoin will hit new all-time highs. However, it remains to be seen whether this momentum will continue, given continued regulatory factors and market uncertainties.

Ethereum ETF: Grayscale Retains Hope

Grayscale says it is confident that the US Securities and Exchange Commission (SEC) will approve its Ethereum (ETH) spot ETFs by May, despite recent concerns about the level of commitment from the SEC with the applicants and their ongoing investigation into the Ethereum Foundation.

Craig Salm, Senior Legal Director at Grayscale, pointed out the similarities between the approval processes for Bitcoin spot ETFs and Ethereum spot ETFs, emphasizing that the fundamental operations are fundamentally the same, with the main difference being the underlying asset: Bitcoin vs Ethereum.

This consistency, according to Salm, should make the SEC's review process easier, contributing to Grayscale's optimism for a positive outcome.

Grayscale's outlook contrasts with that of Bloomberg ETF analysts Eric Balchunas and James Seyffart. Both observers have lowered their expectations for Ethereum spot ETF approvals for May to 25%. Balchunas suggests that the SEC's apparent lack of commitment could be deliberate and not just a delay.

Cryptocurrency exchange Coinbase has also urged the SEC to approve Grayscale's proposed Ethereum spot ETF. In a letter to the SEC, Coinbase argues that the logic used to justify the approval of spot Bitcoin ETFs applies equally, if not more strongly, to the case of spot Ethereum ETFs.

The SEC is expected to make a decision on VanEck's application by May 23, while the fate of other applicants is expected to be announced around the same time. Companies like BlackRock, VanEck, Fidelity, and Grayscale are actively seeking approval for their Ethereum spot ETFs.

Grayscale's confidence in the SEC's approval of Ethereum spot ETFs is based on the parallels between the processes for Bitcoin ETFs and Ethereum spot ETFs.

The firm believes that the key issues the SEC addressed during the Bitcoin spot ETF approval process are largely the same for Ethereum spot ETFs, suggesting the regulator's experience with Bitcoin could pave the way. for Ethereum.