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GBTC Records $458M Net Outflow on Day Four, Spot BTC ETF Group Gains $474M on Fourth Day: BitMEX Research

GBTC, the largest and oldest Bitcoin fund in the market, has experienced huge outflows of funds in the past four days, as investors have shifted their attention to the newly approved spot Bitcoin ETFs, according to data from BitMEX Research.

BitMEX Research, a crypto data and analysis provider, published an update on Jan. 18, 2024, on the flows of funds between GBTC and the spot Bitcoin ETFs, which are exchange-traded funds that directly track the price of Bitcoin by holding the cryptocurrency itself.

According to BitMEX Research, GBTC had a net outflow of US$458 million on the fourth day, with a cumulative net outflow of US$1.62 billion over the four days. This means that investors have been selling their GBTC shares and withdrawing their funds from the fund.

On the other hand, the spot Bitcoin ETF group, which consists of 11 ETFs that were approved by the U.S. Securities and Exchange Commission (SEC) on Jan. 10, 2024, saw net inflows of $474 million on the fourth day, and net inflows of $1.29 billion over the four days. This means that investors have been buying the spot Bitcoin ETFs and depositing their funds into the ETFs.

The data suggests that there has been a significant shift in investor preference and behavior, as the spot Bitcoin ETFs offer a more convenient, efficient, and cost-effective way to gain exposure to Bitcoin than GBTC.

GBTC, which stands for Grayscale Bitcoin Trust, is a grantor trust that invests directly in Bitcoin and issues shares that trade on the over-the-counter (OTC) markets. GBTC was launched in 2013 and has become the largest and most popular Bitcoin fund in the market, with over US$26 billion in assets under management.

However, GBTC has also faced several challenges and drawbacks, such as high fees, trading at a discount or premium to its net asset value (NAV), and lack of redemption mechanism. GBTC charges a 2% annual fee, which is much higher than the fees of the spot Bitcoin ETFs, which range from 0.20% to 0.95%. GBTC also often trades at a significant discount or premium to its NAV, which means that its returns do not always match those of Bitcoin. GBTC also does not allow investors to redeem their shares for Bitcoin, which limits their liquidity and flexibility.

The spot Bitcoin ETFs, on the other hand, are exchange-traded funds that trade on major exchanges like the NYSE Arca and the Nasdaq, and track the price of Bitcoin by holding the cryptocurrency in custody with regulated custodians. The spot Bitcoin ETFs offer several advantages over GBTC, such as lower fees, trading near their NAV, and allowing redemption for Bitcoin. The spot Bitcoin ETFs also provide more transparency, security, and accessibility to investors, as they are regulated by the SEC and can be bought and sold through regular brokerage accounts.

The approval of the spot Bitcoin ETFs was a long-awaited and historic milestone for the crypto industry, as it marked the first time that the SEC allowed a fund that directly invests in Bitcoin to trade on a major exchange. The approval came after more than a decade of failed attempts and rejections by the SEC, which had previously only approved Bitcoin futures ETFs, which are funds that invest in derivatives contracts based on the price of Bitcoin, not Bitcoin itself.

The launch of the spot Bitcoin ETFs has been met with strong demand and enthusiasm from investors, as evidenced by the inflows of funds and the trading volumes of the ETFs. According to data from Bloomberg, the spot Bitcoin ETFs traded over US$2.5 billion in their first day of trading, and over US$6 billion in their first week. The spot Bitcoin ETFs have also attracted institutional investors, such as ARK Invest, which bought over US$100 million worth of shares in the Fidelity Bitcoin ETF (FBTC) and the BlackRock Bitcoin ETF (BBTC) on the first day.

The emergence of the spot Bitcoin ETFs has also had an impact on the price of Bitcoin, which has risen by more than 10% since the approval of the ETFs, surpassing the US$50,000 mark once again. The spot Bitcoin ETFs have increased the demand and liquidity for Bitcoin, as well as its legitimacy and adoption among mainstream investors.

The data from BitMEX Research shows that the spot Bitcoin ETFs have also posed a serious challenge and threat to GBTC, which has seen its market share and dominance erode in the face of the new competition. GBTC may have to adapt and innovate to survive and retain its relevance in the market, such as by converting into a spot Bitcoin ETF itself, or by lowering its fees and offering redemption options to its investors.

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