Grayscale is issuing its gBTC fund, with Coinbase serving as the custodian. Grayscale uses Coinbase… when they ask to convert their gBTC into BTC, it’s recorded as BTC in Coinbase. Then, they can go and buy it as BTC from Coinbase.
In recent transactions and movements, we observe a regular increase in ETF funds, coupled with a corresponding decrease in Grayscale’s assets. This suggests that entities like Blackrock might be moving their potential gBTC investments into their own funds. It seems that gBTC investors are also shifting towards other ETFs. Now, since they have their own ETFs, they prefer to transfer their investments from Grayscale to their own ETFs, rather than generating profits for Grayscale. To accomplish this, they sell their gBTC and withdraw BTC from Coinbase in exchange. The conversion from gBTC to BTC doesn’t impact BTC itself, but the moment they withdraw from Coinbase, it appears in the market as if they have made a purchase. That’s why the price of BTC is rising.
Since a Bitcoin ETF issues shares equal to the amount of Bitcoin it holds, naturally, the number of ETFs in Grayscale’s possession decreases. On the other hand, it increases on the side of Blackrock, etc. The day this movement stops will indicate that these transfers have ended. At that time, we will be left solely with BTC. Then, the real trade volume will emerge, which will determine the price.
We wrote this article to explain why we posted the previous tweet.
P.S. According to the chart, Coinbase inflows are on the spot side.