Bitcoin price falls as FTX dumps Grayscale Trust

Investors have sold $2.2 billion worth of shares in the Grayscale Bitcoin Trust (GBTC) since its conversion into an exchange-traded fund (ETF) earlier this month. A significant portion of this exodus is attributed to FTX’s bankruptcy estate, which reportedly dumped 22 million GBTC shares, amounting to close to $1 billion.

Grayscale Bitcoin Trust (GBTC)

The Grayscale Bitcoin Trust, which had operated as a closed-end fund for a decade, accumulated nearly $30 billion in assets before the U.S. Securities and Exchange Commission (SEC) approved its conversion into an ETF, along with the approval of 10 newly created bitcoin ETFs.

Following the SEC’s approval, a wave of spot bitcoin ETFs began trading on January 11. While these new funds, issued by companies like BlackRock and Fidelity, attracted inflows, the GBTC saw substantial outflows, with investors pulling out billions of dollars worth of bitcoin.

The spot bitcoin ETF market fluctuated between net inflows and outflows over the week, with a return to net inflows of $474 million on Wednesday, contrasting with net outflows on Tuesday and the largest outflow on the fifth day.

The selling pressure on GBTC coincided with a decline in the price of bitcoin since the approval of the new ETFs. Bitcoin’s price fell, contrary to optimistic forecasts that anticipated a surge in its value with the approval of bitcoin ETFs, which were seen as an easier way for traditional investors to gain exposure to the cryptocurrency.

Now that FTX has completed its selling of substantial GBTC holdings, it’s that the selling pressure on GBTC could ease. FTX, like other large crypto trading entities, took advantage of the price disparity between Grayscale trust shares and the net asset value of the underlying bitcoin in the fund.

Separately, FTX and its defunct trading arm Alameda Research have also been transferring crypto assets to exchanges. Spot On Chain reports that FTX and Alameda Research moved $28 million in cryptocurrencies, including Wrapped Bitcoin, Ether, and Pendle (PENDLE), to Coinbase and Binance on January 14.

These transfers by FTX and Alameda are part of their efforts to raise funds for creditor repayment following their bankruptcy declaration in November 2022. FTX administrators have reportedly reclaimed approximately $7 billion in assets, including $3.4 billion in cryptocurrency.

The market’s response to FTX creditor claims has been somewhat optimistic, with some claims trading as high as $0.50 on the dollar in October 2023. This suggests a reasonable chance for creditors to recover their funds. While there is no definitive timeline for FTX customer reimbursements, current plans estimate that repayments should start sometime in 2024.