Bitcoin ETF stems outflows to help stabilize crypto at $40K

investmentnews.com:

Bitcoin steadied around $40,000 amid a slowdown in outflows from the $20 billion Grayscale Bitcoin Trust that strategists said may help to stanch a two-week slump in the token.

About $4.8 billion has exited the more than decade-old bitcoin portfolio — the world’s largest — since it became an exchange-traded fund on Jan. 11, data compiled by Bloomberg show. Bitcoin has shed some 20% in the same period.

The fund’s conversion from a closed-end format allowed investors to close out a popular arbitrage trade and sparked disposals by the estate of the bankrupt FTX exchange. The daily pace of outflows from the vehicle, also known as GBTC, hit a peak of $641 million on Jan. 22 but cooled to $394 million by Jan. 25.

“We’re starting to see a pattern of decreasing redemptions from GBTC,” Sean Farrell, head crypto strategist at Fundstrat Global Advisors, wrote in a note. “We’ll certainly need to see a few more days of follow-through, but a mere slowing down of this AUM exodus would serve as a large boost for the market.”

The Grayscale fund began trading in its new format on the same day that nine other spot bitcoin ETFs, including from BlackRock Inc. and Fidelity Investments, debuted in the US. Those funds have attracted more than $5 billion, while the net inflow into the 10 spot ETFs as a whole stands at about $745 million, according to data compiled by Bloomberg.

Shares in the Grayscale vehicle fell to a discount to the portfolio’s underlying bitcoin holdings from early 2021 when the product was closed-end. ETF units tend to hug net asset value so the prospect of the trust’s conversion led speculators to bet on the discount disappearing, which has duly happened.

“Profit-taking on previous GBTC investments, made at a discount to