March 19 (Reuters) - A selloff in bitcoin that continued

on Tuesday has been accompanied by record outflows from

Grayscale's Bitcoin Trust, accelerating the asset losses the

fund has experienced since it converted into an exchange traded

fund earlier this year.

Grayscale's ETF notched a daily record of $642.5 million in

outflows on Monday, according to data from BitMEX Research, when

bitcoin tumbled about 4%. The cryptocurrency was down another 2%

by mid-afternoon Tuesday, bouncing off its lows. Data for

Tuesday's flows will be available Wednesday morning.

Investors have been unloading holdings in the Grayscale fund

since it converted into an ETF January 10. Meanwhile, money has

flowed into the nine new spot bitcoin ETFs approved by the U.S.

Securities and Exchange Commission on the same date.

Monday's outflows from the Grayscale ETF brought the total

to roughly $12 billion since Jan. 10, though the 52% gain in

bitcoin's price has helped counterbalance some of those losses.

The fund's assets now stand at $27.2 billion, compared to $29

billion on the first day of trading in the new ETFs.

"As the largest and currently the most expensive bitcoin

ETF, profit taking and redemptions are understandable," said

Todd Rosenbluth, head of research at VettaFi, a market analysis

firm.

Grayscale didn't immediately respond to requests for

comment. The firm's CEO, Michael Sonnenshein, told CNBC Tuesday

that he had anticipated outflows and attributed them to

arbitrage-related selling or liquidations by bankruptcy trustees

of former crypto giant FTX.

Sonnenshein also said for the first time that the firm will

cut fees on its fund "over time." The current 1.5% fee is

significantly higher than those levied by the nine other ETF

providers. Their fees top out at around 0.25% although temporary

waivers often bring them down to zero.

Most other bitcoin funds saw muted inflows or little net

change in their assets. The lack of fresh buying, combined with

the Grayscale outflows, made Monday the lowest single day for

bitcoin ETF flows since late January.

"Money isn't going to pour into these ETFs day after

day," said Rosenbluth. "It's reasonable that people take profits

after strong runs."