The recent market turmoil has left many investors feeling confused. Grayscale announced its Bitcoin holdings. Since the approval of the Bitcoin spot ETF, Grayscale’s Bitcoin trust holdings have continued to flow out of more than 20,000 coins. On the contrary, several newly approved ETFs are growing significantly. BlackRock has increased from more than 200 coins at the beginning to more than 16,000 coins now. The market is experiencing a dramatic change of hands, which is a key reason for short-term price pressure.
Why is Grayscale’s GBTC selling off in large quantities? In fact, the reason is very simple. Prior to the approval of spot ETFs, U.S. stock investors could only invest in Bitcoin through Grayscale Bitcoin Trust GBTC. However, GBTC is a futures rather than a spot, resulting in a large futures-to-cash difference. In a sense, it only symbolically represents Bitcoin assets. In addition, the market is overheated and things are scarce, making Grayscale’s transaction fees nearly 8 times higher than other ETFs. Finally, GBTC has a 6-month lock-up period and is less flexible.
Therefore, the sideways or fluctuations caused by the recent selling pressure are mainly due to the dissatisfaction of GBTC customers in the past (high handling fees, lock-up, and unrealistic prices), and they left GBTC in large numbers. Since it does not directly hold the private key, Grayscale needs to liquidate its holdings and return them to customers, who then purchase newly approved ETFs. This process will continue to bring selling pressure to the market, creating a roller coaster risk. Grayscale is discussing the possibility of converting futures into spot with regulatory authorities. After this problem is eliminated, the market will usher in a new stage of development.
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