Grayscale Halts GBTC Inflows and Buys Back Shares

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  • Grayscale has apparently halted inflows to its GBTC trust and arranged a $250 million stock buyback
  • Grayscale has been suffering from an increase in competition in the space
  • They have also hired nine ETF experts which could suggest a new direction

Grayscale has allegedly halted inflows into its Grayscale Bitcoin Trust (GBTC) following weeks of trading negative to the value of the bitcoin underlying it. The trust, once the only way institutions could get safe and easy exposure to Bitcoin, has seen a reduction in demand in recent months following competitors such as ETFs and other institutional avenues, meaning that demand for Grayscale is not as strong as it once was. This has led to the company announcing that it will buy back $250 million worth of its shares, and there are signs it might even be looking towards an ETF model in the future.

Dominance Coming to an End

Grayscale has been the go-to fund for institutions wanting to buy into Bitcoin and recently Ethereum and Litecoin, which saw the premium rocketing to huge margins as institutions fought to gain access to the booming crypto markets last year. This led to Grayscale hoovering up almost all the new BTC and ETH being produced by miners.

In 2021 however, things have soured. Canada has launched two Bitcoin ETFs and could be launching a third, while three applications are with the Securities and Exchange Commission for a Bitcoin ETF in the U.S. Alongside this, banks are offering their own crypto investment opportunities – Fidelity launched its crypto fund last year, while Blackrock is also planning a Bitcoin futures product. Just this week, JPMorgan announced a Cryptocurrency Exposure Basket which allows institutional investors to gain exposure to crypto companies and ride the wave.

Grayscale Bitcoin ETF on the Horizon?

All of this explains why GBTC has been trading at a discount to the real thing for several weeks, as has GETH, and also explains why they may have decided to halt inflows. Grayscale also announced yesterday that it plans to buy back up to $250 million in GBTC in a stock buyback that they hope will stimulate the performance of the stock, which endured a 36% correction last week.

Interestingly, Grayscale has also hired nine ETF specialists, which could suggest a change in direction for the group, and could see them adding their name to the three already in the hat for a Bitcoin ETF in the United States.