Grayscale’s Bitcoin Trust continues to trade at a discount – and the money is flowing out of the Bitcoin ETFs in Canada. What’s happening?

Institutional demand for cryptocurrencies – partly responsible for Bitcoin’s phenomenal run – is slowing, according to new findings from blockchain analytics firm Glassnode.

According to the firm, institutional investors (large organizations that invest copious amounts of money in crypto) are losing interest in the largest cryptocurrency by market capitalization. The proof of this is provided by a look at the Grayscale Bitcoin Trust (GBTC), according to the report.

GBTC, a popular investment product that allows investors to trade shares in trusts that hold large Bitcoin pools, is now constantly traded at a sustained 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 still in 2021?) itself. And that wasn’t the case until recently – for years, investors paid a premium to buy into GBTC.

As the report says:

“A primary driver of Bitcoin price growth in 2020 and 2021 has been both the narrative and the reality of institutional demand. One of the biggest factors was the unilateral flow of coins into Grayscale’s GBTC trust fund as traders sought to arbitrate the high premium observed in 2020 and early 2021.“


“Since February 2021, the GBTC product has reversed to trade at a sustained discount to the NAV, reaching the lowest discount of -21.23% in mid-May.“

Cause for concern?

The report also adds that the combined amount of Bitcoin has fallen for two popular exchange-traded funds (ETFs, Purpose and 3iQ). Currently, the combined net flows for both ETFs over the past month show that a total of 8,037 BTC have flowed from the products.

3iQ’s holdings have fallen by 10,483 BTC (over $ 381 million at today’s prices), according to the report.

Cause for concern? Not according to 3iQ CEO Fred Pye. According to him, this is simply a sign that successful investors are paying off their profits.

“There is no slowdown at all,” says the CEO of the Toronto-based ETF. His company has spoken to hundreds of potential customers in the last two weeks alone.

“The request we get is still real and significant,” Pye said. The outflows would come from investors who have already made profits.

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 (to buy from 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 stagnating. Since December, the balance sheet is flat.

The conclusion of the report:

“Between observations of the GBTC premium, net outflows from the combined Purpose and QBTC ETFs, and a stagnant Coinbase balance sheet, institutional demand seems to remain somewhat lackluster.“

Text credit: Decrypt

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