Grayscale GBTC Outflows Dampen Bitcoin's Rally, But Future Surge Anticipated

Massive outflows from the Grayscale Bitcoin Trust (GBTC) have emerged as a headwind for Bitcoin's price rally. GBTC, once a popular vehicle for institutional Bitcoin exposure, is unwinding its product to convert into a spot Bitcoin ETF. This sell-off is temporarily increasing Bitcoin supply, slowing upside momentum and keeping the price below its all-time high.

Are Bitcoin Outflows from Grayscale's GBTC Weighing on the Rally?

Analysts are pointing the finger at massive outflows from Grayscale's Bitcoin Trust (GBTC) as a culprit for recent headwinds in Bitcoin's upward trajectory. But how long will this outflow pressure persist?

GBTC, once the go-to vehicle for institutions seeking Bitcoin exposure, is currently unwinding and transitioning into a spot Bitcoin ETF. However, this conversion is having unintended consequences for Bitcoin's price momentum.

Outflows Stall Bitcoin's Upside

As GBTC liquidates more Bitcoin, the upward momentum slows due to a temporary increase in supply. This has kept Bitcoin below its all-time high of around $73,737.

Lookonchain data reveals that Friday marked the fourth consecutive day of net negative flows for US-listed spot Bitcoin ETFs, with GBTC leading the charge. BlackRock, however, added a substantial $226 million worth of Bitcoin, exacerbating the outflow pressure.

BlackRock's Role

Despite continued inflows from BlackRock and other top spot Bitcoin ETF issuers, there has been persistent outflow over the past week. The 7-day net inflow stood at 8,179 BTC, or -$516.7 million, by March 22.

This accelerated redemption has coincided with a drop in Bitcoin's price, reaching a low of $62,300 on Friday before stabilizing over the weekend.

Genesis Liquidation Rumors

Coinbase Institutional analysts speculate that Genesis, the bankrupt crypto lender, may be liquidating its GBTC holdings. The exact amount of GBTC held by Genesis remains unknown, but if they are unwinding at spot or over-the-counter exchanges, it could have a ripple effect on Bitcoin's price.

GBTC's Unwinding: A Double-Edged Sword

For Bitcoin holders, the liquidation of GBTC is a double-edged sword. While it's contributing to the current outflow pressure, it's also reducing GBTC's total Bitcoin holdings.

By Friday, GBTC controlled 355,759 BTC, having liquidated 5,900 BTC from Thursday. This suggests that Grayscale has liquidated roughly half of its total haul from January 2024.

Spot Bitcoin ETFs Buying the Dip

As GBTC liquidates, other issuers, including BlackRock, have been accelerating their purchases on behalf of clients. This suggests that spot Bitcoin ETFs are taking advantage of the dip.

Halving Event and Grayscale's Motivation

Once Grayscale fully unwinds GBTC and converts into a spot Bitcoin ETF, BTC prices are likely to rally even higher, breaking above $74,000. This is especially true considering the impending BTC halving event in April, which will reduce the supply of new BTC by 50%.

Perhaps Grayscale's sudden sell-off is motivated by this upcoming halving event, as the firm seeks to reposition itself as a spot Bitcoin ETF before the supply shock.

BlackRock: Potential Largest BTC Holder

If the outflow from GBTC continues at an accelerated pace, BlackRock could emerge as the largest BTC holder among all spot BTC ETFs in the United States.