FTX Saga Continues to Affect the Crypto Market
- FTX’s bankruptcy estate sold about $1 billion worth of Grayscale’s Bitcoin ETF, significantly impacting market outflows.
- This massive sell-off could ease the selling pressure on Bitcoin, offering a new direction post-ETF approvals.
- The move highlights the influence of major players on the cryptocurrency market and the volatility surrounding Bitcoin investments.
In a significant turn of events, the bankruptcy estate of FTX, a once-prominent crypto exchange, sold approximately $1 billion worth of the Grayscale Bitcoin Trust (GBTC), a move that explains a substantial part of the recent outflows from the fund. This information, obtained from private data reviewed by CoinDesk and corroborated by two sources familiar with the matter, sheds light on the recent fluctuations in the Bitcoin market.
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FTX’s Liquidation of GBTC Shares
FTX’s move to liquidate its holdings comes in the wake of the approval of a slew of spot bitcoin Exchange-Traded Funds (ETFs) by the U.S. Securities and Exchange Commission (SEC). These ETFs, including those issued by financial giants BlackRock and Fidelity, began trading on January 11, 2024, after years of anticipation and regulatory delays. The Grayscale Bitcoin Trust, which had been in existence for a decade as a less attractive closed-end fund, was also converted into an ETF as part of this shift, bringing its nearly $30 billion in assets under the new format.
While the new funds have seen inflows, GBTC has experienced the opposite, with over $2 billion worth of bitcoin being pulled out since its conversion. The bulk of this exodus is attributed to FTX’s bankruptcy estate offloading its entire stake of 22 million shares in GBTC. As of October 25, 2023, FTX held 22.3 million GBTC, valued at approximately $597 million. However, this value surged to around $900 million by January 11, 2024, the first day of Grayscale’s bitcoin ETF trading on the NYSE Arca.
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Bitcoin Market Reacts to Major ETF Shift
This massive sell-off by FTX is a stark contrast to the high expectations that surrounded the approval of Bitcoin ETFs. Many in the crypto community had hoped that these ETFs would simplify Bitcoin investment for the average person, sparking optimistic forecasts for Bitcoin’s price. However, the reality has been quite different, with Bitcoin’s price falling since the approval of these ETFs. The liquidation of FTX’s substantial holdings in GBTC, a relatively unique event due to the nature of the bankruptcy estate, might now ease some of the selling pressure on Bitcoin.
FTX, like many large crypto entities, had capitalized on the price disparity between the Grayscale trust shares and the net asset value of the underlying Bitcoin. Besides GBTC, FTX also held shares in five other Grayscale trusts and almost 3 million shares in a statutory trust managed by Bitwise, held in a brokerage account at ED&F Man Capital Markets, now Marex Capital Markets Inc.
Marex Capital Markets Inc. and Galaxy Digital, the crypto trading specialist assisting with the FTX bankruptcy estate’s asset sales, have declined to comment on the matter. Furthermore, on Monday, Alameda Research, a trading firm linked to FTX, voluntarily dismissed a lawsuit against Grayscale over allegations of excessive fees.
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