Bitcoin - The GBTC ETF Blocks the Way to $100,000

Bitcoin hits an all-time high, but lacks enthusiasm. Will we have to wait for the GBTC ETF to be depleted to climb higher?

Bitcoin’s Best Start to the Year Since 2013

Bitcoin appreciated by 67% during the first quarter, primarily due to the ETFs introduced in January. We could have even reached $100,000 if the party hadn’t been somewhat spoiled by the outflows from the old GBTC Trust…

Despite this odd anomaly, bitcoin is back at an all-time high and the BlackRock ETF is already the most popular in history. The endorsement from the world’s largest investment fund has rallied those who were waiting for more regulatory clarity.

The following chart clearly shows a correlation between the influx of money into ETFs and the price of bitcoin:

There appears to be a clear correlation btw Bitcoin ETF inflows & BTC price 👇 Thoughts? pic.twitter.com/QSQwLxV6Vi

— HODL15Capital 🇺🇸 (@HODL15Capital) April 8, 2024

All ETFs are soaring except for the GBTC ETF, which is losing clients due to its exorbitant management fees. Indeed, the reimbursement to clients triggers the sale of bitcoins held in the ETF, hence the timid rise in bitcoin’s value.

Fortunately, the massive outflows from the GBTC ETF ($15 billion) are largely offset by the nine new ETFs, which have already attracted $27 billion. In other words, all ETFs have absorbed $12 billion of net inflows during the first quarter.

All eyes remain on the GBTC ETF, which now holds only 320,000 bitcoins, nearly twice as few as in January. The cause, as we mentioned, is management fees (1.5%) that are six times higher than those of competitors.

NYDIG estimates that $5 billion has left the GBTC ETF following the unwind of the bankruptcies of Genesis and FTX. This means that $10.1 billion have walked out due to dissatisfied clients.

The GBTC ETF now manages only $23 billion, versus already $19 billion for BlackRock.

What Is Grayscale Up To?

If Grayscale does nothing, its GBTC ETF will soon lose its leading position to BlackRock.

Yet, its CEO Sonnenshein has been promising for over a year to lower management fees without ever taking action…

"Your fees have been consistently high for people who's money is just sitting there…How do you explain that?" @BeckyQuick asks $GBTC CEO @Sonnenshein.

"We are committed to lowering our fees when $GBTC converts to an ETF," he says.

"That's like waiting for Godot," says Becky. pic.twitter.com/turUt3vyL6

— Squawk Box (@SquawkCNBC) March 8, 2023

“I will gladly confirm that over time, as this market matures, fees will come down,” he said on March 19 on CNBC.

“I don’t think the 11 ETFs will all survive. There will be consolidation, and they all know it, which is why fees are at rock bottom”, he earlier claimed this year.

Grayscale seems to be waiting for things to settle down, perhaps betting on the fact that it will be the survivors who will ultimately align with its fees.

Moreover, Grayscale remains profitable as long as it holds at least 103,000 BTC. After all, 1.5% fees on 103,000 BTC equals 0.25% fees on 620,000 BTC!

For now, BlackRock and Fidelity are taking the lion’s share. ARK and Bitwise have secured the 4th and 5th spots, managing to outpace well-established players like VanEck, Invesco, and Franklin Templeton.

We will see whether this strategy proves to be profitable. Just yesterday, the GBTC ETF sold the equivalent of $300 million in bitcoins. At this rate, the ETF will be empty within three months…

The Halving

The next halving will take place on April 19 or 20. It’s another important event as the pace of bitcoin creation will drop from 6.25 to 3.125 BTC every ten minutes. The daily production will go from 900 to 450 bitcoins, equivalent to $32 million at the current rate ($70,000).

NYDIG estimates that the price impact will be relatively limited. Thirty million dollars is only a small part of the global trading volumes, which amount to several billion dollars per day.

However, the halving will surely not go unnoticed by gold holders. They won’t be able to deny the S2F (Stock to Flow) ratio of bitcoin, which will suddenly be twice as high as that of their yellow metal. As we previously wrote:

“Given that the global stockpile of gold is around 180,000 tonnes, and 3,000 tonnes are mined each year, this gives us an S2F ratio of 60 (180,000 / 3,000). That means it would take 60 years of production to double the existing stock.

Bitcoin currently has a slightly lower ratio… Everything will be disrupted starting April 20. The bitcoin S2F ratio will skyrocket to 120, officially making it twice as hard to create as gold. This ratio will exceed 1000 by 2035 when 99% of bitcoins will already be in circulation.”

The halving cannot in itself cause a rise in the price of bitcoin. But it will certainly have a psychological effect capable of triggering large fund reallocations.

All this to say that investors truly have reason to be optimistic for the coming decade.