Grayscale is stirring mixed reactions with its recent transfers of bitcoin to Coinbase following the approval of its spot bitcoin ETF. Since the approval, the investment giant has sent over 31.6K BTC worth over $1.3 billion to Coinbase in a series of transactions. There are two contrasting views on the development – some signaling a possible dump in BTC, and others believing it will have no bearing on the price of BTC.
Industry on Edge as 31.6K BTC Moves Amid Spot Bitcoin ETF Approval
Grayscale made its first transfer of 4,000 BTC or $183 million to Coinbase on Jan. 12, and while mouths went agape, still processing the event, the company made a second transfer. Four days later (Jan. 16), the company transferred 9,000 BTC or $384 million. Then came the latest transfer of 18,638 BTC or $791 million on Jan. 17, making it a walloping 31,638 BTC or over $1.3B.
Many crypto analysts are hinting at internal issues in Grayscale’s BTC ETF market and signaling a resultant imminent dump on BTC. The major narrative from this viewpoint is that Grayscale is experiencing a massive exit of investors due to its relatively higher annual management fee. Popular crypto trader and influencer Ash Crypto drops her two cents on why investors are exiting their positions in GBTC:
“Grayscale is charging a 1.5% yearly management fee, which is 5–6 times higher than other ETF issuers.
A lot of investors bought GBTC at a 40% discount, and now it’s at 0%, so they are exiting their positions. In both scenarios, GBTC now has to sell BTC to pay it back,” wrote Ash Crypto on X.
According to Ash, the potential transfer and sale of BTC by Grayscale is a process that could extend to several weeks, during which BTC may experience a bearish market. The development would also see investors trooping out of Grayscale’s spot BTC ETF into others with cheaper management fees.
Connecting the Dots: Grayscale’s Coinbase Shuffles – A Smooth Path to Establishing Spot Bitcoin ETF?
An opposing and rather more reasonable explanation to Grayscale’s massive BTC transfers recently, is that Coinbase was set as the legal “Custodian” according to the company’s form s-3 filed with the SEC back in October 19 last year. In essence, moving that much BTC to Coinbase is no cause for alarm, since it might just be part of its strategy to fully migrate into a spot bitcoin ETF.
“Grayscale Investments, LLC is the sponsor (the “Sponsor”) of the Trust, Delaware Trust Company is the trustee (the “Trustee”) of the Trust, The Bank of New York Mellon is the transfer agent (in such capacity, the “Transfer Agent”) and the administrator (in such capacity, the “Administrator”) of the Trust and Coinbase Custody Trust Company, LLC is the custodian (the “Custodian”) of the Trust.”
The Grayscale Bitcoin Trust holds 643,572 BTC worth over $20B as of Nov. 2022 – one of the largest BTC holdings in the world. Its market share is currently 3.16 percent of all bitcoin in circulation, which means the slightest changes in its market operations are powerful enough to influence the price of BTC.