Grayscale's Bitcoin Trust continues to trade at a discount - and money is flowing out of bitcoin ETFs in Canada. What's happening right now?
Institutional demand for cryptocurrencies - partly causal to Bitcoin's phenomenal run - is slowing, according to new findings from blockchain analytics firm Glassnode.
According to the firm, institutional investors (large organisations that invest copious amounts of money in crypto) are losing interest in the largest cryptocurrency by market capitalisation. Proof of this can be seen by looking at the Grayscale Bitcoin Trust (GBTC), the report said.
GBTC, a popular investment product that allows investors to trade shares in trusts holding large pools of bitcoin, is now steadily trading at a persistent discount to net asset value (NAV), Glassnode reports. This means shares in Grayscale's Bitcoin Trust are now cheaper to buy than Bitcoin (crashing to $12,000 before the end of 2021?) itself. And that wasn't the case until recently - for years investors paid a premium to buy into GBTC.
As the report states in this regard:
"A primary driver of the bitcoin price rise in 2020 and 2021 was both the narrative and the reality of institutional demand. One of the biggest factors was the lopsided flow of coins into Grayscale's GBTC trust fund as traders sought to arbitrage the high premium observed in 2020 and early 2021."
"Since February 2021, the GBTC product has reversed to trade at a sustained discount to NAV, with the deepest discount of -21.23% reached in mid-May."
Cause for concern?
The report also adds that the combined amount of bitcoin for two popular exchange-traded funds (ETFs, Purpose and 3iQ) has fallen. Currently, the combined net flows for both ETFs over the past month show that a total of 8,037 BTC has flowed out of the products.
Holdings of 3iQ have fallen by 10,483 BTC (over $381 million at today's prices), the report said.
Cause for concern? Not according to 3iQ CEO Fred Pye. According to him, this is simply a sign that successful investors are cashing out their gains.
"There is no slowdown at all," said the CEO of the Toronto-based ETF. His firm has spoken to hundreds of potential clients in the last two weeks alone, he said.
"The enquiry we are getting is still real and significant," Pye said. The outflows are coming from investors who have already made profits, he said.
The 3iQ ETF is one of North America's only crypto ETFs. An ETF is an investment product that tracks the price of an asset - in this case Bitcoin (available to buy on eToro). Investors can buy shares that represent the asset.
While the US is still waiting for a crypto ETF, Canada has already approved several. 3iQ, Canada's first crypto ETF, launched on the Toronto Stock Exchange last April.
Glassnode adds, "The coin balance on Coinbase, the largest crypto exchange in the US, is stagnant. Since December, the balance has been flat.
The report concludes:
"Between observations of the GBTC premium, net outflows from the combined Purpose and QBTC ETFs, and a stagnant Coinbase balance sheet, institutional demand appears to remain somewhat lacklustre."