Bitcoin Price Dips and Grayscale Loses Grip Amid ETF Hype

The recent 7% drop in Bitcoin’s value below $44,000 has raised questions about the sustainability of Grayscale’s Bitcoin Trust (GBTC). Economist Peter Schiff, in a candid social media post on X (formerly Twitter), expressed doubts about GBTC’s resilience amid declining Bitcoin prices. This skepticism coincides with the emergence of competitive, lower-fee Bitcoin Exchange-Traded Funds (ETFs), prompting fears about GBTC shareholder abandonment.

Here’s what these market changes mean for you.

Grayscale’s Future: Still a Question Mark?

In a series of X posts on social media, Schiff mentioned the orderly sell-off in Bitcoin, Bitcoin ETFs, and related equities. Schiff attacked investors who speculated on spot Bitcoin ETF approval, indicating they are unloading their shares. Spot Bitcoin ETFs may struggle to liquidate Bitcoin for U.S. dollars due to their prior reliance on Tether for liquidity and price stability.

The recent entry of Bitwise Invest, Fidelity, and BlackRock into the U.S. market with spot Bitcoin ETFs resulted in an influx of $625.8 million in net inflows. In contrast, Grayscale’s Bitcoin Trust witnessed a loss of $95 million, prompting a closer look at investor preferences and concerns over GBTC’s high fees. Notably, a significant Bitcoin transfer from GBTC to a Coinbase Prime deposit address indicates a potential shift in investor assets to alternative ETFs or a strategic move towards selling.

Did Grayscale’s ETF Sales Fuel the Decline?

Despite Bitcoin experiencing an 8% dip to $42,500 post-ETF approval, market analysts are divided on its success. Anthony Scaramucci, founder of SkyBridge Capital, attributes substantial GBTC share sales as a pivotal factor.

In an interview with Bloomberg Television, Scaramucci highlighted a trend of significant Grayscale selling, with holders converting their shares from a trust to an ETF format. The recent SEC approval of ETFs led many to shift to these lower-fee alternatives, resulting in sell-offs to realize losses.

A milestone to remember

Founded in 2013, Grayscale Bitcoin Trust achieved a remarkable first-day turnover of $2.3 billion on Thursday, marking a milestone for ETFs. However, faced with losses, trust stockholders sought more economical alternatives, contributing to Bitcoin’s dip below $43,000 on Friday. GBTC shares also suffered, falling by 5.2% to $38.58 on Friday, in stark contrast to Bitcoin’s over 160% rise in the previous year.

Read More: Top Pros and Cons of Bitcoin ETFs as Long-Term Investments; Should You Go for It?

Wall Street’s Moves to Leave a Mark

Scaramucci adds another layer to the complex situation by pointing out FTX’s role in the Bitcoin price downturn. The bankruptcy estate of FTX is liquidating substantial crypto assets, putting downward pressure on cryptocurrency prices. Coupled with the approval of Bitcoin ETFs, this has led to increased market selling. Scaramucci anticipates that FTX’s bankruptcy estate selling will alleviate the supply overhang in six to eight trading days.

Furthermore, Scaramucci draws attention to a significant Wall Street development – an impending end to an eight-day silence on ETFs. This suggests a potential market shift as Wall Street actively promotes and markets Bitcoin ETFs.