$5B flight from GBTC likely led to outflows in other regions: CoinShares

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A recent slump in the price of cryptocurrencies, prompted by outflows from the Grayscale Bitcoin Trust (GBTC) could be behind outflows from digital asset investment products in Europe and Canada, according to CoinShares. 

“Recent price declines prompted by the substantial outflows from the incumbent ETF issuer (Grayscale) in the US totalling US$5bn, have likely prompted further outflows [in] other regions,” CoinShares explained in a Jan. 28 report.

Digital asset products from Switzerland and Germany were hit hardest during the trading week of Jan. 22 to Jan. 26, with outflows of $59.8 million and $31.7 million respectively, CoinShares’ data shows.

However, Canadian digital asset products have recorded the largest outflows over the month with $209.8 million, followed by products in Germany and Sweden with $124.5 million and $34.2 million respectively.

Digital asset products from Brazil were the only major inflow last week, with $10.3 million.

Weekly cryptocurrency investment product flows by country. Source: CoinShares

Meanwhile, the second full week of spot Bitcoin ETF trading in the U.S. contributed to an outflow of nearly $500 million alone, CoinShares noted.

While the nine “new” spot Bitcoin (BTC) ETFs tallied nearly $1.8 billion in inflows, it wasn’t enough to patch up bleeding from Grayscale’s converted spot Bitcoin ETF, GBTC, which saw over $2.2 billion in outflows over the week.

However, GBTC outflows are beginning to subside as its daily total in outflows continued to reduce over the week, CoinShares noted.

Weekly cryptocurrency investment product flows (USD/ millions). Source: CoinShares

For several years, GBTC offered a profitable trade for investors who borrowed money to enter the fund and then scalped profit on the Grayscale premium, which reached as high as 43% in July 2019, according to YCharts data.

The GBTC arbitrage trade vaporized when the premium suddenly became a discount in February 2021. Due to the minimum six-month lock-up period imposed on investors purchasing GBTC shares, many investors became trapped in the fund, unwilling to sell their shares at a continually worsening discount.

Following GBTC’s conversion to a spot Bitcoin ETF, the discount has fallen from 1.55% to 0% on Jan. 26, YChart’s data shows.

Related: BlackRock drops ‘boomer’ Bitcoin ETF ad as marketing blitz ramps up

While $5 billion has been wiped from GBTC this month, CoinShares noted that the newly issued spot Bitcoin ETFs have tallied $5.94 billion in inflows seen in the Bitcoin products since started trading on Jan. 11.

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