Bitcoin Hiccups in First Week of ETF Trading

Forget the victory lap, bitcoin's post-ETF rally hasn’t even begun… partly thanks to an odd double whammy: Grayscale's hefty fees and the ghost of FTX.

Here's the gist…

Grayscale's greed: While everyone else brought cheap spot ETFs to the market (with funds offering promotional rates as low as 0% for the first several months), Grayscale (GBTC) clung to its outdated model, continuing to charge a hefty fee of 1.5%. Investors weren’t having it. Since GBTC converted into an ETF, roughly $4 billion worth of GBTC shares have fled, with a significant chunk traced back to the one and only… FTX. 

• In contrast, the other newly launched spot-bitcoin ETFs have drawn about $5 billion in inflows within their first eight trading days.

Adding fuel to the fire, the undead FTX estate decided to clear out its Grayscale closet, cashing in a whopping 22 million shares worth ~$1 billion. Now, this wasn't exactly a surprise. But the timing (using the ETF launch to dump a massive bag), 14 months after their demise, was enough to raise some eyebrows.

The good news? The FTX fire sale might be nearing its end. With FTX's ghost appeased, selling pressure should (in theory) ease up.

The bad news? Following simple supply and demand dynamics, inflows are still ~$1 billion higher than outflows.

Let’s make that very clear: Inflows thus far have been net POSITIVE. Yet here we are, sitting at $39,000 BTC, down roughly 15% since the SEC approval.

This proves that anyone blaming the GBTC for all of bitcoin’s recent slump is clearly wrong. And that there’s got to be another reason, still lurking beyond mainstream media, that better explains BTCs recent dip.

Is it because the stock market is pumping and getting more attention? Is it because leveraged positions are getting liquidated? Maybe it’s the huge 100k selloff from a whale? Or perhaps, as Arthur Hayes explains, is it because bitcoin anticipates that the Bank Term Funding Program (BTFP) will not be renewed?

To anyone who just jumped on the bandwagon – via ETF or not – welcome to crypto. 🙂 

The macroeconomics behind each and every pullback and uptick are only getting more difficult to understand.

At the end of the day, if you zoom out and look at the price of bitcoin you’ll notice that it is still up >75% over the past year.

And while $1 billion in net inflows may not seem like a lot in the face of predictions of $75 billion of inflows… in the context of previous buying pressure, it is huge.

Microstrategy (MSTR), for example, holds ~190k bitcoin. The nine ETFs bought 100k bitcoin in the first 7 days.