Ramazan Eles 
Digital asset investment products witnessed a significant shift last week, experiencing outflows for the first time in eight weeks, according to data from CoinShares. The total outflows reached a staggering $942 million, marking a sharp reversal from the previous seven weeks that saw inflows of $12.3 billion.
Grayscale Bitcoin Trust (GBTC) Drags Down Market
Grayscale Bitcoin Trust (GBTC), the incumbent player in the Bitcoin ETF market, emerged as the primary culprit behind the outflows. Investors pulled a substantial $2 billion from GBTC, significantly outweighing the positive inflows of $1.1 billion observed in new US ETF issuers.
Bloomberg’s cryptocurrency strategist, James Seyffart, attributes the net outflows primarily to recent bankruptcy proceedings. He suggests that selling activities by Gemini and Genesis, likely associated with the bankruptcies, were the major drivers behind the outflows from GBTC.
Outflows Expected to Ease
Seyffart anticipates a potential slowdown in outflows moving forward. With the bankruptcy-related selling pressure likely to subside, a return to inflows could be on the horizon. Estimates suggest that Gemini and Genesis may have roughly $3.9 billion worth of GBTC remaining to offload.
High Fees Continue to Plague GBTC
One of the longstanding criticisms of GBTC has been its high gas fees, which have deterred investors and contributed to the outflows. Grayscale CEO Michael Sonnenshein has acknowledged this concern and hinted at upcoming efforts to reduce fees.
Bloomberg ETF strategist Eric Balchunas expressed skepticism regarding the possibility of significant inflows returning to GBTC in the future. He suggests that smaller, newer Bitcoin-based ETFs with lower fees (under 30 basis points) might be more attractive to investors.
Balchunas raises a critical point regarding the potential presence of “mirage assets” or “tax hostages” within GBTC’s AUM (Assets Under Management). This implies that a significant portion of GBTC’s holdings might not represent readily tradable positions for many investors.
Altcoins See Silver Lining
While Bitcoin dominated the outflows, with a staggering 96% share ($904 million), altcoins offered a glimmer of hope. The report by CoinShares highlights positive inflows for several altcoins, including Polkadot ($5 million), Avalanche ($2.9 million), and Litecoin ($2 million). Overall, the altcoin space collectively recorded net inflows of $16 million, providing some balance to the week’s overall trend.
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