Grayscale Dumps BTC Explained: Understanding short-term bearish but mid and long term bullish spot ETFs

Prior to the landmark approvals of the spot ETFs, Grayscale Bitcoin Trust (GBTC) was redeeming its shares by giving investors value against the US Dollar (USD). This means that they would not sell Bitcoin (BTC).

With this, Grayscale ascended to become one of the largest BTC holders, besides the pseudonymous Satoshi.

Following the approval of spot ETFs on January 10, and the subsequent trading beginning January 11, investors began to withdraw their money out of GBTC.

Among the reasons why the investors are pulling their money include:

  • The 1.5% discount that Grayscale is charging yearly as a management fee. This rate is almost 6x times higher than what other ETF issuers are charging. Refer to this on the fees wars article by FXS reporter Ekta Mourya. 
  • Many investors had acquired GBTC at a 40% discount. Now that the discount is at 0%,  they close their positions. FXS reporter Aaryaman Shrivastava tells you how GBTC discount has come to an end

Both instances warrant that GBTC sells BTC to pay it back.

Market watchers expecting GBTC to stop dumping should get their popcorn as this could go on for a while. This is because of the large bucket of $25 billion GBTC. X user @Ashcryptoreal says, "This can take a few weeks," adding that investors should expect possible horizontal consolidation for Bitcoin price, or in the dire case, BTC could start dumping as well, in the wake of selling pressure. 

Renowned economist Peter Schiff had also given his analysis of how long this could last, saying it was the overhead pressure from GBTC redemptions that weighed heavy on Bitcoin price upside potential.

In the end, investors will likely move their money from GBTC into other ETFs where there is lower management fees compared to Grayscale's 1.5% annual discount.  

With this panning out to be a long-term game, Bitcoin price is likely to rally once grayscale begins to rotate back in with an ETF product that competes with the others. The SEC determining that cash creations are a necessary for the spot ETFs played a key role in getting us to where we are, which means Grayscale must first sell before they can get back in the game.

Grayscale Bitcoin Trust sees $484 million in outflows

Grayscale Bitcoin Trust (GBTC) has seen $484 million in outflows on Friday as GBTC holders capitalize on open redemption options. With it Bitcoin price has also dropped upwards of 7%.  

In hindsight, the Grayscale Bitcoin Trust (GBTC) held over $25 billion worth of Bitcoin, which had been locked up for years because there was no option for selling. With the recent spot BTC ETF approvals, which inclined toward cash creates, the redemption option opened. This provided leeway for GBTC holders to exit the trust after years, which means selling the BTC on the open market.

According to data from Arkham Intelligence, Grayscale sent 4,000 BTC worth $183 million to a Coinbase Prime deposit address, suggesting that investors may be switching their assets to other ETFs or selling normally.

Also Read: Bitcoin Weekly Forecast: BTC crashes as GBTC dumps, but bullish outlook still not under threat

After trading of spot BTC ETFs began on Thursday, the numbers were shocking, with the latest reports showing that trading volume hit $4.5 billion during the first day of trading. Based on the report, about 50% of this was attributed to Grayscale's GBTC. 


Recent reports revealed that after the landmark approval on Wednesday, Spot BTC ETF trading volume hit $1.2 billion in 20 minutes, and almost $2 billion within the hour. Grayscale‘s GBTC led the train with $446 million, followed by IBIT and Fidelity’s FBTC in third place while Ark Invest’s ARKB took fourth place.

Spot BTC ETF trading volumes

According to James Seyffart, flows likely comprised the lion’s share of the trading volume, save for GBTC.

Eric Balchunas says these are "unreal first-day numbers" and expects the record to be broken today.

CryptoQuant data shows that Coinbase's Bitcoin trading volume over the counter (OTC) reached $7.7 billion on Thursday, marking the second-largest level in history.

In principle, this means that Bitcoin purchases over-the-counter may be related to the approval of Spot BTC ETF, with crypto exchange trading volume reaching $52 billion, levels last seen on March 21, 2023.

SEC approves all spot BTC ETF applications on January 10

In a landmark decision, the US SEC has approved all Bitcoin spot ETFs in a single, unprecedented decision on Wednesday, January 10.

This unexpected green light for the long-awaited financial instruments, confirmed in an official announcement, ignites immediate euphoria across the cryptocurrency industry.

SEC approves all spot BTC ETFs

The US SEC surprisingly gave the green light to the 11 spot ETF applications submitted by major players like Grayscale, Bitwise, Hashdex, Valkyrie, Ark 21Shares, Invesco, Fidelity, and others.

The decision comes after months of intense industry lobbying and a recent flurry of amended 19b-4 filings, hinting at growing pressure on the SEC to act.

The approval marks a paradigm shift, granting direct access to Bitcoin via ETFs for millions of institutional and retail investors who previously lacked options.

Notably, the Chicago Board Options Exchange (CBOE) had jumped the gun, announcing the listing of spot ETFs ahead of the approval and highlighting that trading would commence on Thursday. January 11.

Indeed, trading could begin on Thursday, with a bunch of the prospectuses going effective as S-1's approvals are being checked off.

Despite Spot BTC ETF approvals, the SEC does not endorse Bitcoin

Nevertheless, even though the commission greenlit the spot BTC ETFs, chair Gary Gensler said in a statement that it is not an endorsement of Bitcoin.

While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse bitcoin. Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.

It comes after Gensler cautioned market participants about the risks of crypto investing, listing possible incompliance, market risk, and fraud, as part of the dangers. 

The original link to Spot BTC ETF approvals was taken down

The US Securities and Exchange Commission (SEC) has removed the original link showing that all Bitcoin exchange-traded funds (ETFs) have been approved. 

Approval link taken down

Grayscale to list GBTC to NYSE Arca as SEC approves spot Bitcoin ETFs

With this development, Grayscale has received the necessary regulatory approvals to uplist GBTC to NYSE Arca, with a spokesperson noting that they would be sharing a press release later. 

Crypto markets react to ETF approval

Bitcoin price has dipped almost 1% in the immediate aftermath of the news and currently trades at $45,976.

BTC/USDT 1-hour chart

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content

Recommended Content

Editors’ Picks

XRP Price Outlook: A breakout or significant price movement may be imminent for Ripple’s token

XRP Price Outlook: A breakout or significant price movement may be imminent for Ripple’s token

Ripple price has been range-bound for a while, with token holders patiently holding as the ecosystem contended against the US SEC. As per a recent report, the payments token’s price has been stuck below $0.50, failing to breach key resistance levels.

More Ripple News

Runes token standard diminishes BRC-20 hype, thwarts Ordinals engagement a day after launch

Runes token standard diminishes BRC-20 hype, thwarts Ordinals engagement a day after launch

Bitcoin token standards have been a notable theme of late, with Ordinals and BRC-20 making headlines in the first quarter of 2024. However, there is a new player in the works, Runes, which could be the next narrative as the ecosystem continues to evolve.

More Runes News

Avalanche Price Prediction: AVAX primed for gains as altcoin nails its 37% measured move target

Avalanche Price Prediction: AVAX primed for gains as altcoin nails its 37% measured move target

Avalanche (AVAX) price, like most altcoins, is showing strength following the fourth Bitcoin (BTC) halving. The landmark event, which has inspired positive market sentiment, has capital spilling over into other cryptocurrencies, including AVAX.

More Avalanche News

Meme coin madness returns after Bitcoin halving concludes

Meme coin madness returns after Bitcoin halving concludes

Meme coins are on a tear, with some posting double-digit gains despite characteristic weekend lull. BONK, FLOKI, PEPE, SHIB are sector’s top gainers while DOGE tries to catch up after Dogecoin Day. Solana’s Bonk Inu and Myro are top chain performers after SOL price’s 6% gains.

More Meme Coins News

Bitcoin: BTC post-halving rally could be partially priced in Premium

Bitcoin: BTC post-halving rally could be partially priced in

Bitcoin (BTC) price briefly slipped below the $60,000 level for the last three days, attracting buyers in this area as the fourth BTC halving is due in a few hours. Is the halving priced in for Bitcoin? Or will the pioneer crypto note more gains in the coming days? 

Read full analysis