Why most Grayscale investors may remain in profit if GBTC falls further 20% to $27

According to data from trading firm Webull, around 70% of Grayscale GBTC holders likely remain in profit. The average shares were purchased at $27.82, some 20% below the current price as of press time.

The Webull data shows the state of the trust the day before its conversion to a spot Bitcoin ETF and indicates that 70% of investors had a cost range between the $18.84 and $27.24 range.

In terms of distributions, the first concentration of shareholders appears to be positioned between $33 and $40. With the price at $34.9 as of press time, it will be interesting to see whether the bottom of this range acts as a support for the price amid continued outflows.

The second concentration is much lower, between $18 and $21. This group will remain profitable until the GBTC price falls another 39%.

Should the price fall to this level and its assets under management see an equivalent decline, we’d witness a further 230,000 BTC hit the OTC desks, worth around $8.9 billion as of press time.

Such a drop would leave Grayscale with roughly 350,000 BTC, which at a 1.5% management fee would still generate approximately $200 million in revenue if Bitcoin retained a value of around $39,000. This underlines the lack of pressure on Grayscale to lower fees along with the seemingly limitless potential for Grayscale investors to take profits. With few inflows into the ETF, the percentage of investors in profit is very high.

Thus, there is certainly an argument to be made that Grayscale’s pressure on Bitcoin’s price through profit-taking could be as severe as a near-40 % drawdown. For bears in the audience, a 40% drop for Bitcoin right now would take it to May 2023 lows of roughly $23,000.

Potentially 100% of Grayscale investors in profit at conversion.

Since its conversion, the ETF has seen considerable outflows totaling roughly $3.5 billion. Its assets under management have also fallen to $22.1 billion (552,681 BTC) from a year-to-date high of $29 billion (623,390 BTC) on Jan. 10. In dollar terms, its AUM all-time high was actually further back, aligning with the top of the 2021 bull market at a staggering $44 billion (651k BTC.)

Interestingly, even at the top of the market, concerns about the trust’s makeup resulted in it trading at a 15% discount to its net asset value (NAV), representing a price top of around $58,000 instead of the spot price of $69,000. This discount continued to increase until the start of 2023, reaching -47% at its lowest.