After the approval of the Bitcoin spot ETF, the performance of Bitcoin has been sluggish. The Grayscale Bitcoin Trust (GBTC), which has transformed into a Bitcoin spot ETF, has experienced continuous outflows of funds, which is believed to be the main reason for the decline in the price of Bitcoin. Some analysts believe that Bitcoin may continue to decline until the liquidation of GBTC is completed, but Mike Novogratz, the founder of Galaxy Digital, has a different view.
Since the approval of the Bitcoin spot ETF by the U.S. Securities and Exchange Commission (SEC), the price of Bitcoin has significantly declined from a high of $48,969 on the 11th to the current level of around $41,500. It is believed that this is due to the transformation of GBTC into a Bitcoin spot ETF, which has led investors to sell off and take profits as the negative premium approaches zero.
According to data from BitMEX Research, in the six trading days prior to last Friday after GBTC transformed into a Bitcoin spot ETF, the total outflow of GBTC reached $2.8 billion. On the first day, $95.1 million flowed out, followed by $484.1 million on the second day, $594.4 million on the third day, $460.6 million on the fourth day, $582.3 million on the fifth day, and $590.4 million on the sixth day.
Despite some market participants believing that one of the reasons for the sell-off of GBTC may also be due to its high management fee of 1.5%, Bloomberg analyst Eric Balchunas believes that only 10% of the funds from GBTC are likely to flow into other ETFs with lower management fees, which is much less than people imagine.
Considering that GBTC is the largest Bitcoin ETF in the world, holding over $25 billion worth of Bitcoin, Ran Neuner, co-founder and CEO of Onchain Capital, previously warned that Bitcoin may face a period of selling pressure. $25 billion is a significant position, and even if only 20% is redeemed, it means there will be $5 billion of selling pressure in the market.
Therefore, Chris J Terry, the Chief Architect of BTCdata, tweeted on the 21st that the price of Bitcoin will continue to remain the same or decline until the liquidation of GBTC is completed. In the coming weeks, there will be up to $25 billion of selling pressure. The decision by Grayscale to maintain the ETF management fee at 1.5% will be the biggest strategic mistake in the history of cryptocurrency.
However, Mike Novogratz, the founder of Galaxy Digital, disagrees with Chris J Terry’s argument. He tweeted on the 21st that while people may sell off GBTC, most of them will shift their investments to other ETFs, and his own Invesco Galaxy Bitcoin ETF is his favorite. In November last year, Mike Novogratz predicted that with the approval of the Bitcoin spot ETF, there will be up to $10 billion of new capital flowing into Bitcoin ETFs in the first year, and the price of Bitcoin will reach a historical high of $69,000 in the bull market of 2021.
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