In a surprising turn of events, the highly anticipated spot Bitcoin ETFs approval has not led to the expected Bitcoin price surge. Instead, Bitcoin has plummeted by 8.78% since the close of 10 Jan 2024, defying market expectations. This unexpected drop extends to Grayscale’s Bitcoin Trust (GBTC), which has also seen a significant 5.2% decline in its value, raising questions about the future of Bitcoin and the impact of these new ETFs on the market.
Bitcoin’s recent nosedive below $44,000 has sent shockwaves through the cryptocurrency world, casting a long shadow over Grayscale’s Bitcoin Trust (GBTC) and igniting a fierce ETF rivalry. Economist Peter Schiff’s ominous pronouncements about GBTC’s future have only amplified the noise, raising critical questions about the trust’s long-term viability.
Schiff, a vocal Bitcoin skeptic, painted a grim picture of a potential “orderly sell-off” across Bitcoin and related instruments. He pointed the finger at investors who flocked to GBTC in anticipation of spot ETFs approval, suggesting they are now dumping their shares like sinking ships. This skepticism and the emergence of lower-fee rival ETFs have created a perfect storm for the once-dominant trust.
The launch of U.S. spot Bitcoin ETFs by Bitwise, Fidelity, and BlackRock was met with fanfare, attracting a staggering $625.8 million in net inflows. Meanwhile, GBTC, burdened by its hefty fees, hemorrhaged a whopping $95 million, raising a red flag about investor preferences. Adding fuel to the fire, a substantial Bitcoin transfer from GBTC to Coinbase further fueled speculation that investors are fleeing the sinking ship, migrating towards cheaper alternatives or selling altogether.
Anthony Scaramucci, founder of SkyBridge Capital, echoed Schiff’s concerns, pinpointing large-scale GBTC share sales as a key culprit behind the 8% Bitcoin dip following ETFs approval. He believes investors are jumping ship, ditching GBTC for the greener pastures of low-fee ETFs, resulting in sell-offs and downward pressure on Bitcoin prices.
Despite a record-breaking $2.3 billion First-Day turnover on Thursday, Grayscale’s celebration was short-lived. The trust’s shareholders, unimpressed by the fanfare, appear to be voting with their feet, casting their lot with newer, more attractive options. GBTC shares tumbled 5.2% to a dismal $38.58 on Friday, a stark contrast to Bitcoin’s impressive 160% rally in 2023.
Beyond GBTC’s woes, the ongoing liquidation of FTX’s crypto assets, as Scaramucci suggests, is adding further downward pressure on prices. However, he expects this selling pressure to subside within a week, potentially offering some much-needed respite for Bitcoin.
And then there’s Wall Street. The looming entry of Wall Street giants into the ETF arena promises to shake things up even further. With their marketing muscle and established distribution channels, they could rapidly amplify the reach and appeal of Bitcoin ETFs, potentially triggering a new wave of investment and further squeezing GBTC’s market share.
The coming weeks promise to be a rollercoaster ride for Bitcoin and the broader crypto market. As the ETF rivalry intensifies, GBTC faces an uphill battle to retain its once-unassailable position. The market waits with bated breath to see if the trust can weather the storm or succumb to the rising tide of cheaper, more innovative alternatives.
