Grayscale Bitcoin ETF records first inflow after losses

Grayscale Bitcoin Trust (GBTC), the largest Bitcoin (BTC) exchange-traded fund (ETF) by assets, reported its first net inflow since its launch in January 2024.

This comes after the fund experienced a $1.6 billion outflow before the Bitcoin halving.

According to data from Farside Investors, a net inflow of $63 million was recorded in GBTC on May 3. This marked the first positive net flow for the fund since its conversion to an ETF in January, when 11 new spot Bitcoin ETFs were launched in the US.

Several factors have contributed to the steady outflows since GBTC’s conversion to an ETF. One of the main reasons for this is the fund’s 1.5% annual management fee; this fee is considerably higher than other Bitcoin ETFs that charge less than 1%.

Additionally, the sale of GBTC shares by bankrupt crypto companies such as FTX and Genesis also caused outflows. FTX sold approximately $1 billion worth of GBTC shares, and Genesis liquidated approximately 36 million shares valued at $2.1 billion to purchase Bitcoin.

On the same May 3, there was a total net inflow to the market of 378 million dollars. Notable performances included Franklin Templeton’s Bitcoin ETF (EZBC), which recorded its highest-ever inflow of $60.9 million, and Fidelity’s Bitcoin ETF (FBTC), which led the day with inflows of $102.6 million.

The entry halted Grayscale’s streak of net withdrawals from Bitcoin Trust (GBTC). Currently, GBTC’s assets are $18.1 billion, while IBIT has reached $16.9 billion. While IBIT started with zero assets in January, GBTC was valued at over $26 billion. While entry is a positive sign for GBTC, IBIT’s rapid growth is increasing competitive pressure.

This shift from outflows to inflows in GBTC and the broader Bitcoin ETF market has created a sense of optimism among investors; Some have suggested that this could be an early indication that Bitcoin has reached all-time highs. However, it is not yet clear whether this momentum will continue, given ongoing regulatory and market uncertainties.

Ethereum ETF: Grayscale remains hopeful

Grayscale is confident that the U.S. Securities and Exchange Commission (SEC) will approve spot Ethereum (ETH) exchange-traded funds (ETFs) by May, despite recent concerns about the SEC’s level of interaction with applicants and its ongoing investigation into Ethereum. Temel said he was sure.

Grayscale Chief Legal Officer Craig Salm noted the similarities between the approval processes for spot Bitcoin ETFs and spot Ethereum ETFs, emphasizing that the underlying operations are essentially the same, with the main difference being the underlying asset, Bitcoin and Ethereum.

According to Salm, this consistency will make the SEC’s review process simpler and contribute to Grayscale’s optimism about a positive outcome.

Grayscale’s perspective contrasts with that of Bloomberg ETF analysts Eric Balchunas and James Seyffart. Both observers lowered their expectations for spot Ethereum ETF approval to just 25% in May.

Balchunas suggested that the SEC’s apparent lack of involvement may have been intentional rather than just a delay.

Cryptocurrency exchange Coinbase also encouraged the SEC to approve Grayscale’s proposed spot Ethereum ETF. Coinbase argued in a letter to the SEC that the logic used to justify approval of spot Bitcoin ETFs applies equally, if not stronger, to spot Ethereum ETFs.

While the SEC is expected to make a decision on VanEck’s application by May 23, the fate of other applicants is expected to be announced on the same dates. Companies like BlackRock, VanEck, Fidelity, and Grayscale are all actively seeking approval for spot Ethereum ETFs.

Grayscale’s confidence in the SEC approving spot Ethereum ETFs is based on parallels between the processes for spot Bitcoin and spot Ethereum ETFs.

The company believes that the fundamental issues the SEC addressed during the spot Bitcoin ETF approval process are largely the same for spot Ethereum ETFs, suggesting that the regulator’s experience with Bitcoin could pave the way for Ethereum.