Grayscale Bitcoin Trust Withdrawals Hit Record Low—Has the Selling Stopped?

Grayscale Bitcoin Trust withdrawals on Wednesday dropped to their lowest daily level since the fund was converted into a spot Bitcoin ETF in January, prompting optimism that the fund will stop selling sizable chunks of Bitcoin as a result.

Investors in the ETF only sold about $17.5 million worth of BTC, compared to well over $150 million per day over the previous three trading days. The sudden slowdown has some Bitcoiners on Crypto Twitter (aka X) excited that Grayscale has nothing left to give, which could relieve the broader Bitcoin market of a major source of sell pressure.

Exactly three months since GBTC began trading as a Bitcoin spot ETF, the fund has now lost over 300,000 BTC—nearly half of the holdings it had in January. That’s despite nonstop inflows to competing funds run by BlackRock and Fidelity, and a Bitcoin price that’s shot up 58% this year. So who exactly is dumping their GBTC, and why?

Many outflows appear to stem from the bankruptcy estates of FTX and Genesis, which were respectively granted permission to liquidate well over $2 billion in collective GBTC holdings over the past few months. Data from Arkham suggests that Genesis liquidated shares worth over 32,000 BTC ($2.1 billion) in March.

Management fees also play a role: Grayscale charges investors 1.5% per year to invest with them, compared to 0.25% charged by the iShares Bitcoin Trust (IBIT). That gives prospective Bitcoin buyers little incentive to buy GBTC over other funds, and potentially sways current investors to switch providers.

That said, on-chain analysis suggests that Grayscale’s outflows aren’t some temporary anomaly, but a completely natural phenomenon also observed in previous Bitcoin bull markets.

“GBTC is functioning exactly the same as HODLer selling,” wrote lead Glassnode analyst James Check on Twitter Tuesday.

In an accompanying video presentation, Check explained that most of the coins held by GBTC entered the fund in the summer of 2021. Their respective buyers are now sitting on a massive profit, and naturally have started taking chips off the table—much like long-term holders typically do when Bitcoin breaks its former all-time high.

“It is irrelevant whether coins are from bankrupt estates, disgruntled holders, or arbitrage traders,” he argued.

Despite starting with a near $30 billion lead over competitors, there’s now a gap of less than $4 billion between it and BlackRock’s iShares Bitcoin Trust.

Edited by Stacy Elliott