GBTC's First Inflows Don't Mean More of the Same

It finally happened. After 78 straight days of outflows, the Grayscale Bitcoin Trust (GBTC) finally had an inflow. 

On Friday, the ETF registered inflows of $63 million, according to data from Bloomberg, an unexpected sight for the expensive fund.  

In the nearly four months leading up to the inflow, GBTC had totaled outflows of $17.5 billion, the second-most of any U.S.-listed ETF this year, behind the $22 billion of outflows for the SPDR S&P 500 ETF Trust (SPY). 

The reasons for GBTC’s outflows were plenty. Many traders had piled into the ETF ahead of its conversion into an ETF in January to profit from the reduction in its discount to net asset value.  

After the conversion, they took their profits, fueling outflows from the fund.  

The outflows were compounded by sales made by disgraced crypto exchange FTX and crypto lender Genesis, as well as GBTC’s sky-high fees.  

At 1.5%, GBTC’s expense ratio was multiples of its competitors, turning off investors who now had viable alternatives from which to choose. 

The iShares Bitcoin Trust (IBIT) has taken in $15.5 billion of money so far this year and recently ended a streak that was the mirror image GBTC’s streak—71 straight days of inflows. 

What Happened? 

GBTC’s outflows streak weren’t surprising given the factors working against the ETF. 

Arguably what’s more surprising is Friday’s inflow. Who bought GBTC when a host of cheaper ETF alternatives are available? 

But it was bound to happen. As I wrote in March, when GBTC’s streak was at 53 days, “even if Grayscale doesn’t slash its fee, you have to think that one day, everything will align perfectly for the fund, and we’ll see a nice green bar on the flows chart.” 
 
Perhaps investors were covering shorts, closing a pair trade, oblivious, or perhaps something else caused the inflows. 

We’ll probably never know. 

Going forward, I don’t expect sustained inflows for GBTC as long as its fees are so much higher than its competitors. But the fund is likely to have the occasional inflow like the one on Friday.