Crypto outflows triggered by GBTC impact on European and Canadian digital asset products

Cryptocurrency outflows in Europe and Canada have been influenced by the recent price slump in the market, primarily driven by substantial outflows from the Grayscale Bitcoin Trust (GBTC) in the United States.

According to a report by CoinShares, the outflows from GBTC, totaling a significant $5 billion, have likely led to further outflows in other regions, particularly impacting digital asset investment products in Switzerland, Germany, Canada, and Sweden.

Crypto outflows in Europe and Canada

During the trading week from January 22 to January 26, digital asset products in Switzerland and Germany experienced notable outflows of $59.8 million and $31.7 million, respectively. However, the situation was more severe in Canada, where digital asset products recorded the largest outflows over the month, totaling $209.8 million.

Germany and Sweden followed closely with outflows of $124.5 million and $34.2 million, respectively. On a positive note, digital asset products in Brazil saw inflows of $10.3 million, serving as a rare exception amid the widespread outflows.

Impact of spot Bitcoin ETF trading in the U.S.

CoinShares also noted the impact of the second full week of spot Bitcoin ETF trading in the United States, contributing to a significant outflow of nearly $500 million. While nine “new” spot Bitcoin ETFs attracted approximately $1.8 billion in inflows, this influx was insufficient to offset the outflows from Grayscale’s converted spot Bitcoin ETF, GBTC, which witnessed over $2.2 billion during the week.

For several years, GBTC had been a profitable investment vehicle for those who borrowed money to enter the fund and took advantage of the Grayscale premium. The premium reached 43% in July 2019, creating opportunities for investors.

However, this arbitrage trade began to unravel when the premium abruptly turned into a discount in February 2021. Due to the minimum six-month lock-up period imposed on GBTC shares, many investors were trapped in the fund, hesitant to sell their shares at a continually worsening discount.

With the conversion of GBTC to a spot Bitcoin ETF, the discount has decreased from 1.55% to 0% as of January 26, according to YChart’s. While GBTC has seen $5 billion in outflows this month, it’s noteworthy that the newly issued spot Bitcoin ETFs have collectively attracted $5.94 billion in inflows since they began trading on January 11.