Grayscale outflows should be near their end – Needham (NYSEARCA:GBTC)

Grayscale Bitcoin Trust ETF’s (NYSEARCA:GBTC) outflows may be done, according to Needham in an industry update report, published on Friday.

The $4.4B in outflows from Grayscale were driven by FTX’s liquidation, which was about $900M, arbitrage funds, and outflows for lower-cost ETFs, according to Needham analysts.

Although there has been a net inflow to Bitcoin ETF products, as ETFs were approved earlier this month, the market has seen net outflows in the past few trading days.

“We believe outflows driven by FTX and arbitrage funds should be nearing their end, as it is now estimated that the entire FTX position of 22M (GBTC) shares has been sold, and arbitrage funds (which we estimated as about $5B in the final months before approval) would have exited soon after the discount closed,” analysts said.

Jan. 24 was one of the lowest days in net outflows from Grayscale Bitcoin Trust ETF (GBTC), and the third consecutive day of declining outflows, which could mean the beginning of a slowdown in trades.

Grayscale holds about 537,000 Bitcoin worth about $20.6B, with $4.4B in net outflows since the ETF conversion. Although the ETF is seeing almost 15,000 Bitcoin outflows daily, it has no limit that would prevent greater outflows.

“We have been surprised that the outflows were not larger initially, and hence would have found a floor faster, with roughly equal amounts of outflows each trading day so far,” analysts said.

Analysts also said they believe the drivers that contributed to the selling are nearly done. “It is estimated that the FTX liquidation is complete, and we believe most arbitrage/opportunistic funds that were buying in the three months prior to ETF approval have now sold or are nearly sold out of the trade.”

Three months prior to Grayscale’s ETF conversion, there was approximately $8B in notional buying.