BTC slump persists

Well, it's been a surprisingly hectic early phase of existence for exchange-traded funds (ETFs) connected with the spot price of Bitcoin.

BlackRock’s iShares product, IBIT, surpassed $1 billion in assets as of this past Wednesday. And despite spot BTC prices falling roughly 10% since last Friday, the new ETFs are notching eye-popping trading volumes. On Tuesday alone, for example, new BTC ETFs combined to produce $1.9 billion worth of volume.

Nine new low-fee products – a cadre that does not include Grayscale's converted GBTC, with its 1.5% management fee – collectively saw a 34% jump in volume on Thursday compared to Wednesday, pointed out Eric Balchunas, Bloomberg's senior ETF analyst. "Normally, with a hyped launch, you see volume steadily decrease each day post-launch," Balchunas said in a post on X. "Rare to see it reverse back up."

GBTC's transformation from a closed-end trust fund (with nearly $30 billion in assets) into a liquid, publicly traded ETF immediately made it the world's biggest seller of BTC, as outflows mount, and with the fund consistently needing to recalibrate its holdings to stay in synch with BTC's price, which has been in decline, possibly creating something of a vicious cycle.

As the price of BTC declines, Grayscale must sell commensurately, Protos explained.

“GBTC’s daily sales have formed a predictable pattern,” Protos said. “Granted, with its tens of billions of dollars' worth of Bitcoin, it wasn’t hard to track their lumbering footprints."

Significant BTC trading volume occurs now each day, particularly between 3 p.m. (EST) and 4 p.m. (EST), according to Galaxy Digital's Alex Thorn.

And this volume, he said, “escalates into what has been a predictable Grayscale dump into the close."

Ever since spot Bitcoin ETFs won approval last week, the largest crypto's market capitalization has taken a hit, decreasing by as much as 15%. The slump represents a sell-the-news, contrarian bet that "shows no signs of slowing," CoinDesk said.

GBTC shares went to a 0.9% discount amid selling pressure.

BTC is near $41,000, down 15% from a recent high of $49K.

Total crypto assets ($1.703 trillion) fell 2.8% in 24 hours as of 10 a.m. (EST).

Crypto's slide is being blamed on Grayscale selling. Or might the culprit be fear itself?

CoinDesk, by way of analysts at Arkham, tracked verified wallets belonging to Grayscale, manager of GBTC.

This on-chain sleuthing shows that GBTC moved more than $400 million worth of BTC to custodian Coinbase Prime, most likely ahead of an eventual sale. That was just on Thursday.

Meanwhile, GBTC bled $1.5 billion in investor assets since last Thursday.

"If GBTC loses its liquidity advantage, it could see an additional $10 billion in outflows,” JPMorgan said yesterday.

But traders might be overstating the impact of GBTC selling.

"GBTC outflows find a counterpart in net inflows to the remaining spot Bitcoin ETF funds," Cointelegraph's Marcel Pechman pointed out.

Don't confuse volumes and flow, he cautioned. Because while buyers and sellers are always getting matched, it's impossible to know what's really motivating these moves: is the seller merely closing a position amassed earlier in the day? Is the buyer turning right around to take an opposite tack in an attempt to exploit arbitrage opportunities?

"The question investors should think about," Pechman stressed, "is whether the exit from GBTC will continue, and if the aggregate net inflow [to other BTC ETFs] is sustainable in the long run."