Grayscale Bitcoin: Bitcoin Dumping Continues As BTC Price Tanks Under $41,000, Is Grayscale Behind This?

Bitcoin (BTC) Price Tanks to $40,000, Is Grayscale Behind This?

January 19, 2024

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Expertise : Cryptocurrency, Blockchain, Macro Finance

Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets.   He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills. Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.

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Bitcoin (BTC), the largest cryptocurrency globally, experiences significant selling pressure, marking a 3.45% decline on Thursday and slipping below the $41,000 mark. This downturn extends Bitcoin’s weekly losses to over 10%, with the current BTC price at $40,896 and a market cap of $805 billion.

What’s Behind the BTC Price Correction?

Ever since the launch of the spot Bitcoin ETFs last week, there have been massive outflows witnessed from the Grayscale Bitcoin Trust (GBTC). As a result, Grayscale has to liquidate a large number of Bitcoins as part of its GBTC holdings. A total of $2.2 billion has moved out of GBTC so far over the last week.

In a recent statement, renowned crypto analyst Scott Melker addressed concerns about Grayscale’s role in the market, emphasizing that the asset manager is not actively “dumping on the market.” Melker clarified that the selling of Grayscale’s Bitcoin Trust (GBTC) is initiated by individuals selling their GBTC holdings, prompting Grayscale to sell an equivalent amount of Bitcoin.

He highlighted that this process is not nefarious but rather a fundamental aspect of the mechanics associated with an Exchange-Traded Fund (ETF). Melker’s insights shed light on the dynamics at play and provide context to the market movements involving Grayscale and its Bitcoin holdings.

However, these developments have been leading to downward selling pressure on the BTC price in these days.

Bitcoin ETFs Show Healthy Development

Since their launch, the spot Bitcoin ETFs have witnessed a healthy uptick in trading volumes with inflows into multiple ETF offerings. The BlackRock spot Bitcoin ETF has clocked more than a billion in inflows within just four days of launch.

In a notable development, Bloomberg’s senior ETF strategist, Eric Balchunas, has drawn attention to the nine Bitcoin ETFs, highlighting a remarkable 34% increase in volume compared to the previous day. Balchunas finds this trend intriguing, noting that in typical hyped-up launches, one would expect the volume to gradually decrease each day post-launch.

However, the ETFs have defied this pattern by experiencing an unexpected upswing in volume. Although all but one of the ETFs witnessed a surge, Balchunas points out that the Grayscale Bitcoin Trust (GBTC) remained flat, indicating that the observed phenomenon wasn’t attributed to volatility. Balchunas sees this as a positive sign, expressing optimism about the performance of the Newborn Nine ETFs in the market. with over $27.5 billion in assets, the Bitcoin ETFs have also surpassed Silver.

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

Blachunas notes that the discount on Grayscale Bitcoin Trust (GBTC) has experienced a reversal, moving in the opposite direction and climbing back up to 96 basis points. He suggests that this shift could be attributed to selling pressure.