Bitcoin in danger? Grayscale's never-ending outflows are causing confusion!

At this breakneck pace, Grayscale’s Bitcoin reserves are at risk of running out by the end of July, some crypto-world analysts warn. The cause of this frenzy? A relentless outflow of BTC from their ETF. And it is not about to ease up.

Grayscale Bitcoin Trust: The Massive Outflows, a Warning Signal?

The figures concerning the fund outflows from Grayscale’s GBTC are more than alarming. As of March 18th, outflows amounted to 642.5 million dollars. The next day, this figure dropped to 443.5 million dollars. On Thursday, March 21, the total fund outflows from Grayscale’s Bitcoin Spot ETF for the week reached 1.4 billion dollars.

However, this hemorrhaging of funds, which does not fail to affect Bitcoin (BTC), is far from abating.

Grayscale’s cryptocurrency-asset-managed Bitcoin exchange-traded fund (ETF) records another day of massive outflows, reports Cointelegraph. On March 21, nearly 359 million dollars were withdrawn from the fund, raising concerns, but analysts are considering an impending end to this exodus.

This net outflow of 358.8 million dollars from the Grayscale Bitcoin Trust (GBTC) follows a tumultuous week, marked by the record exit of 642 million dollars on March 18 reported by Farside Investors.

These recent outflows bring to 1.8 billion dollars the total outflows this week for GBTC, marking the fourth consecutive day of net outflows across all 10 Bitcoin ETFs.

As of March 21, Grayscale announced that its Bitcoin Trust held 23.2 billion dollars in assets under management. Since its conversion to an ETF on January 11, GBTC has lost a total of 13.6 billion dollars.

An independent researcher, ErgoBTC, pointed out that about 1.1 billion dollars of the recent GBTC outflows seem to be linked to the bankrupt crypto lender Genesis. This correlation raises questions about the financial health of the sector and the potential impact on the Bitcoin market.

End in Sight for Grayscale Outflows?

Analysts sense the imminent end of the fund outflow trend at Grayscale. Bloomberg ETF’s Eric Balchunas suggests that most of these outflows are related to bankruptcies in the cryptocurrency sector, and that the worst may have passed.

The more I think about it the more likely the uptick in flows is related to the bankruptcies bc of the size and consistency. The flows in Feb showed what retail outflows look like, smaller and random pattern. Also any Gemini/Genisis outflows likely buying btc w cash hence market…

— Eric Balchunas (@EricBalchunas) March 22, 2024

“The more I think about it, the more likely it seems that the surge in outflows can be attributed to bankruptcies because of their size and consistency. February’s outflows showed what individuals pulling out funds looks like—smaller and random. Moreover, outflows from Gemini/Genesis probably bought BTC with cash, which would explain why the market has held steady. Bottom line: the worst is likely about to be over. Once it is, it will mainly be retail and the outflows should become more like the drizzle we saw in February.“

Balchunas suggests that fund outflows from industry giants Gemini or Genesis may soon be reinvested into Bitcoin, thus supporting the market. This analysis aligns perfectly with ErgoBTC’s view.

This anticipation suggests a possible turnaround, with an expected strengthening of the cryptocurrency market in the near future.