Grayscale’s GBTC Faces Outflows as Fed Maintains High Interest Rates: Impact on Crypto Market

• Grayscale Bitcoin ETF GBTC experiences outflows once again, indicating market uncertainty over the Fed rate cuts.
• Despite this, Susquehanna International invested $1 billion in GBTC in Q1 2024.
• Uncertainty persists until the Fed gains confidence that inflation will fall under the 2% target.

Grayscale’s GBTC sees outflows resume amidst market uncertainty over Fed rate cuts, despite significant investment from Susquehanna International.

Outflows from Grayscale GBTC Resume

Following two days of consecutive inflows, the Grayscale Bitcoin ETF GBTC saw net outflows resume on Tuesday, May 7. Data from Farside Investors shows that US Bitcoin ETFs experienced net outflows of $15.7 million, with GBTC alone reporting $28.6 billion in net outflows.

Institutional Investment in GBTC

Despite high management fees, institutional investors continue to show interest in GBTC. As per recent SEC filings, asset manager Susquehanna International holds over $1 billion worth of Bitcoin in GBTC, indicating continued demand among institutional players.

GBTC Share Price and Ethereum ETF Withdrawal

The GBTC share price has risen by 10% over the last week, although it came under mild pressure on Tuesday, closing at $56.11. In a surprising move, Grayscale also withdrew its Ethereum ETF application on the same day.

Uncertainty Over Fed Interest Rates

Recent trading sessions have seen the cryptocurrency market buoyed by hopes that the Fed will begin rate cuts, supported by higher jobless data. However, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, has indicated that the central bank is likely to maintain current interest rates for an extended period.

Conclusion

Despite significant investment from Susquehanna International, outflows from GBTC have resumed, indicating market uncertainty over Fed rate cuts. This uncertainty is likely to persist until the Fed gains confidence that inflation will fall under the 2% target. As a result, Bitcoin’s price is expected to remain range-bound, with selling pressure on every rise.