May 30, 2024
Grayscale Bitcoin Trust ETF 'Halves' Ahead of BTC Halving
Bitcoin Halving

Grayscale Bitcoin Trust ETF ‘Halves’ Ahead of BTC Halving

The Grayscale Bitcoin Trust ETF (GBTC), managed by Grayscale Investments, has experienced a significant decline in its holdings, dropping by half since its trading debut on January 11. Initially containing 619,220 BTC, the spot Bitcoin ETF’s holdings dwindled to 309,871 BTC on its 66th day of trading, representing a 50% decrease. At current market rates, this amounts to approximately $19.7 billion.

Coinciding with Bitcoin’s Halving

The decline in GBTC holdings coincided with the impending Bitcoin halving, slated to reduce the mining reward from 6.25 BTC to 3.125 BTC. This event, occurring approximately every four years, has historically been associated with subsequent rallies in the cryptocurrency market, although it doesn’t directly correlate with the performance of ETFs like GBTC.

Factors Driving GBTC’s Decline

GBTC has faced significant sell-offs since its inception, largely attributed to its high trading fees. With fees starting at 1.5%, GBTC’s costs exceeded those of its competitors, with many other spot Bitcoin ETFs offering lower fees ranging between 0.2% and 0.4%. Notably, BlackRock’s iShares Bitcoin Trust (IBIT) emerged as a key competitor, offering a fee of 0.25% at launch, with additional discounts during the waiver period.

Rise of Rivals

While GBTC experienced outflows, rival ETFs like BlackRock’s IBIT witnessed substantial inflows. IBIT’s holdings surged by over 10,000% from 2,621 BTC at launch to 272,548 BTC by April 16. Despite this growth, IBIT has yet to absorb GBTC’s outflows fully, although collectively, spot Bitcoin ETF providers, including eight other issuers, accumulated around 224,552 BTC, excluding GBTC, since launch.

Collective Impact

As of April 16, 2024, the ten spot Bitcoin ETFs collectively held approximately 862,162 BTC, with a total value of $54.7 billion, underscoring the significant role these ETFs play in the cryptocurrency market.

Conclusion 

In summary, while GBTC experienced a notable decline in holdings leading up to the Bitcoin halving, its competitors, notably BlackRock’s IBIT, have seen remarkable growth, reshaping the landscape of spot Bitcoin ETFs in the United States.

Image by Sketchepedia on Freepik

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