Analyst Warns BTC Price Will Remain Flat as $25 Billion GBTC Liquidation Looms, Galaxy Digital Founder Disagrees

CryptoNews.com

2024-01-21 23:56:40

Ruholamin Haqshanas

Last updated:

January 22, 2024 02:46 EST | 2 min read

Source: DALL·EBitcoin (BTC) investors should brace themselves for potential price stagnation or even a decline as the liquidation of $25 billion worth of Grayscale Bitcoin Trust (GBTC) looms.

Chris J Terry, founding partner of BTCdata Corporation, recently expressed his concerns about the impact of GBTC’s massive sell-off on the cryptocurrency’s price.

“Looks like BTC price will continue flat/down until GBTC is liquidated, $25B of selling over the next few weeks,” he said in a recent post on X (formerly Twitter).

“Grayscale’s decision to keep ETF fees at 1.5% will go down as the biggest strategic error in crypto history. GREEDY IDIOTS.”

Mike Novogratz Believes Investors Will Turn to Other Funds

However, Mike Novogratz, the founder of Galaxy Digital, disagreed with Terry’s analysis.

He said that while some investors may indeed sell GBTC, many will transition their holdings into other exchange-traded funds (ETFs).

I disagree with this. While I think people will sell GBTC, I think most will switch into other ETFs – $BTCO being my favorite !!

Let’s not miss the forest through the trees. It’s now gonna be far easier for boomers to buy corn. And you can get 4×5 times leverage on this…

— Mike Novogratz (@novogratz) January 21, 2024

Novogratz specifically mentioned his preference for Invesco’s BTCO ETF, which has an annual fee of 0.39%, or $39 on a $10,000 investment.

Novogratz also highlights the broader implications of the GBTC liquidation, emphasizing that it will now be easier for traditional investors, particularly baby boomers, to enter the cryptocurrency market.

Additionally, he points out the potential for increased leverage with exposure to Bitcoin, citing the possibility of 4x or 5x leverage.

Novogratz remains optimistic about the future of BTC, suggesting that the current market indigestion will eventually subside.

He predicted that Bitcoin’s price will rise in the coming months, despite the impending GBTC sell-off.

Lower-Fee Bitcoin ETFs to Attract More Inflows

Aurelie Barthere, Principal Research Analyst at Nansen, said in a recent interview with Cryptonews.com that she expects lower-fee ETFs to attract more inflows in the short term.

“ETFs and futures are different instruments; we would expect futures to stay favoured for trading and hedging, and ETFs to be a go-to retail instrument, like in traditional finance.”

The competitive landscape among Bitcoin spot ETF providers, according to Barthere, will be shaped by factors like reputation, size, existing footprint, and management fees.

“Reputation/size/existing footprint + management fee will probably lead to some leaders dominating the market,” she predicted.

JPMorgan analysts have also predicted that the success of these newly created ETFs will hinge on fees and liquidity.

Given the high 1.5% fees associated with GBTC, they expect significant outflows from this Bitcoin trust.

Furthermore, speculative investors who purchased discounted GBTC shares in the secondary market over the past year, anticipating the elimination of the discount to Net Asset Value (NAV) upon conversion, are likely to further contribute to GBTC liquidation.

This could lead to approximately $3 billion exiting GBTC and flowing into the newly launched ETFs.

The analysts anticipate even larger outflows of $5-$10 billion if GBTC fails to reduce its fees to the 0.25% level set by issuers like BlackRock.

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