Scott Melker explains that the drop in BTC price happened because Grayscale had to sell a matching amount of Bitcoins in response to the sale of GBTC shares.
Bitcoin, the largest cryptocurrency, is experiencing significant selling pressure, dropping by 3.45% on Thursday and falling below $41,000. This extends its weekly losses to over 10%, with the current price at $40,896 and a market cap of $805 billion.
Grayscale Bitcoin Trust Outflows Impact BTC Price
Following the launch of spot Bitcoin ETFs last week, funds have shifted away from the Grayscale Bitcoin Trust (GBTC), leading to substantial Bitcoin sales by Grayscale. The outflows from GBTC amounted to $2.2 billion in the past week.
Crypto analyst Scott Melker clarified that Grayscale isn’t intentionally causing a market decline. Instead, the GBTC sales are a reaction to individuals selling their GBTC holdings, prompting Grayscale to liquidate an equivalent amount of Bitcoin.
Grayscale is not actively “dumping on the market.”
People are selling GBTC which means grayscale has to sell the equivalent amount of bitcoin.
It’s not nefarious. It’s simply the mechanics of an ETF.
— The Wolf Of All Streets (@scottmelker) January 18, 2024
Melker highlighted that this process is a standard aspect of how Exchange-Traded Funds (ETFs) operate, offering insights into the mechanics behind Grayscale’s actions.
While not malicious, this dynamic has added to the downward pressure on BTC prices in recent days.
Surprising Uptrend in Bitcoin ETFs’ Trading Volumes
Since their launch, spot Bitcoin ETFs have shown a robust increase in trading volumes, drawing substantial inflows across various ETF offerings. Notably, BlackRock’s spot Bitcoin ETF attracted over a billion in inflows within just four days of its launch.
Bloomberg’s senior ETF strategist, Eric Balchunas, highlighted a remarkable 34% surge in volume across the nine Bitcoin ETFs, defying the typical post-launch pattern where volumes gradually decrease. This unexpected upswing in volume intrigued Balchunas, who observed that, contrary to the trend, the Grayscale Bitcoin Trust (GBTC) remained flat, indicating that volatility wasn’t the driving factor.
On the 'not a good sign' front, GBTC's discount has also reversed, the wrong way, back up to 96bps, likely due to selling pressure but who know we'll see in the flows eventually pic.twitter.com/T7eXrmH6Ju
— Eric Balchunas (@EricBalchunas) January 18, 2024
Balchunas sees this as a positive signal, expressing optimism about the performance of the Newborn Nine ETFs in the market. Surpassing Silver with over $27.5 billion in assets, these Bitcoin ETFs are making a significant impact. Balchunas also noted a reversal in the discount on Grayscale Bitcoin Trust (GBTC), suggesting it may be influenced by selling pressure.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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