Potential ETF Conversion May Trigger $2.7 Billion Exodus from Grayscale Bitcoin Trust: Reports

By: Eva Baxter

Reports suggest that the conversion of Grayscale Bitcoin Trust (GBTC) into an Exchange Traded Fund (ETF) might lead to an outflow of approximately $2.7 billion. This comes as the trust's discount to Bitcoin's current market price has shown a contraction from -46% to -9.77%, which hints at the expectation of the US Securities and Exchange Commission (SEC) granting ETF status to Grayscale. Yet, the market might experience a certain level of instability after this conversion, caution experts.

An evaluation of the inflows into GBTC, led by JPMorgan analysts including Nikolaos Panigirtzoglou, reveals a strategic plan by traders to make gains from the discount post the ETF conversion. The analysis anticipates the reversal of this influx as investors might want to make the most of the arbitrage opportunity as the discount to net asset value narrows down. If GBTC does not make significant reductions to its current fee of 200 basis points after conversion, this outflow amount could further escalate.

While some analysts express concern about the potential adverse impact of this withdrawal on Bitcoin prices, there is also the possibility of this capital being rechanneled into other Bitcoin instruments, providing some level of stability to the market. However, if the finances exit the Bitcoin space entirely, it could result in a price downturn. For now, the market waits for the SEC's decision on the GBTC's conversion to an ETF.