Grayscale Bitcoin Trust Zero Inflow Suggest Institutions are Looking for Regulated Alternatives

Grayscale, the world’s leading crypto asset manager has seen zero inflow into its premiere Bitcoin product since late February when the premium turned negative. The Grayscale Bitcoin Trust (GBTC) was one of the most sought-after institutional Bitcoin investment products in absence of any better-regulated alternatives, and the high demand for these often led to a premium on the product which made it more expensive than the set value.

A negative premium indicates a declining demand for the product and that could be because of the availability of better alternatives nowadays.

No inflows in the Grayscale BTC Trust since the premium turned negative at the end of February. pic.twitter.com/B2GdIg1Dyv

— skew (@skewdotcom) June 3, 2021

Institutional demand has peaked this bull season with many wall street giants and former critics joining the Bitcoin bandwagon. However, in the US institution had limited options for Bitcoin investment with GBTC being the top choice. Since then the likes of JP Morgan, Goldman Sachs, and S&P 500 have introduced some form of Bitcoin investment vehicle for their clients because of which the demand for GBTC has come down.

Is Biden Administration’s Push For Strict Regulations the Cause Behind Falling Interest of Institutions in GBTC?

Grayscale Bitcoin Trust buys Bitcoin and issues fractionalized shares of the company backed by its Bitcoin inventory. This has turned quite a popular trend for investment funds to offer investment opportunities in absence of any regulatory product. However, many have warned that these Bitcoin Trust Funds could face the ire of the regulatory body any day. Even Grayscale had revealed its plans of converting its popular Bitcoin trust into a Bitcoin Exchange-traded fund (ETF). Added with the recent push for stricter regulations around the crypto market by the Biden administration, institutions would not like to take the risk to indulge in unregulated crypto offerings.

More than seven firms have filed with the US Securities and Exchange Commission (SEC) for a Bitcoin ETF offering, out of which the VanEck proposal has already been postponed. While the US chief regulatory body is still mulling over the approval of the first Bitcoin ETF, Canada has approved multiple Bitcoin and Ether ETFs that have turned out to be a great success.