Grayscale's GBTC Transformation: From Bitcoin Accumulator to Prominent Seller After SEC Approval

Historic Transition for Grayscale's GBTC

Grayscale's GBTC, the world's largest bitcoin fund, underwent a transformative shift after a decade of accumulating bitcoin. Previously a trust on OTC Markets, GBTC held no mechanism for retail investors to sell its bitcoin holdings. With a net asset value of $30 billion, the fund's landscape changed on January 10 when the SEC approved GBTC's conversion into an ETF.

Mandatory Bitcoin Selling as an ETF

Post-conversion, GBTC, now an ETF, is mandated to sell and buy bitcoin daily to align its share price with bitcoin's fluctuating value. This marked the first time in history that GBTC became a systematic seller of bitcoin, a shift driven by the necessity to maintain price tracking.

Impactful Selling Pattern and Predictability

As GBTC's massive sell orders ripple through the market, a discernible pattern emerges, particularly during the final open hour for US stock markets. Galaxy Digital's head of research, Alex Thorn, observed a surge in bitcoin selling pressure around 3 pm, allowing for gradual liquidation before the 4 pm market close.

Investor Preference for Cheaper ETFs

Following the SEC's approval, Grayscale experienced negative flows for two days as investors opted to sell GBTC (with a 1.5% annual fee) and invest in other ETFs with lower fees, some as low as 0.2% annually. Grayscale reportedly moved bitcoin to Coinbase Prime for these sales, indicating strategic transfers coinciding with NYSE opening hours.

Grayscale's Response to Evolving Investor Preferences

Grayscale's bitcoin selling pattern reflects investor preferences shifting toward lower-cost investment options and alternative ETFs. GBTC, once a significant bitcoin holder, swiftly transformed into the world's leading seller. The surge in spot bitcoin ETF options prompted investors to explore alternative avenues, triggering Grayscale's strategic bitcoin sales.

In summary, Grayscale's GBTC, after a decade of bitcoin accumulation, becomes a major market participant as the world's leading bitcoin seller, responding to investor demand for lower-cost and diverse ETF options.