FTX Sells $1 Billion of Grayscale’s Bitcoin ETF
The recent conversion of Grayscale’s Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF) was meant to be a watershed moment for crypto investment vehicles. But instead of sparking a bitcoin price surge as many anticipated, it has coincided with falling prices and heavy outflows from GBTC itself. New reporting indicates that collapsed crypto exchange FTX played a major role in those outflows by selling off a huge GBTC position after the conversion.
FTX’s Massive Sell-Off
Data reviewed by CoinDesk shows that FTX, which filed for bankruptcy in November 2022, sold 22 million GBTC shares worth close to $1 billion following the fund’s January 11th ETF conversion. The shares, remnants of a pre-bankruptcy $900 million GBTC investment, represented nearly a third of total GBTC outflows over $2 billion. FTX has now exited its position entirely. The liquidation of such a large holding by a distressed bankruptcy estate is seen as heightening selling pressure on bitcoin in an already bearish market.
Impact on Bitcoin Prices
Hopes were high that easy-to-trade bitcoin ETFs would spur major institutional investment and validation of the cryptocurrency, boosting prices. The Grayscale conversion and simultaneous SEC approval of spot ETFs from mainstream providers like BlackRock seemed poised to do that. Yet bitcoin has only extended its months-long slide amid heavy trading volumes.
Some analysts think FTX’s finished GBTC liquidation could actually ease selling pressure if that singular massive source of dumping is indeed closed. The fund’s manager, Digital Currency Group, is also said to be on better financial footing after FTX’s exit. So GBTC, along with the new spot ETFs, may still benefit bitcoin prices long-term by opening crypto investing to more investors if market conditions improve independent of FTX.
Alameda Research Drops Lawsuit
Additionally, Alameda Research, the trading firm tied to FTX, has dropped its lawsuit against Grayscale over fees and share redemption restrictions. The redemption process has been initiated for authorized participants now that GBTC is an ETF instead of a closed-end fund. Between that change and FTX’s absence, GBTC’s future looks less clouded than during the days leading up to its ETF conversion.
Hot Take: The Impact of FTX’s Sell-Off on Bitcoin Prices
The sell-off of $1 billion worth of Grayscale’s Bitcoin Trust shares by FTX following the conversion into a spot ETF has caused heavy outflows from the fund and coincided with falling bitcoin prices. However, now that FTX has finished selling its entire GBTC position, selling pressure could potentially ease in the market. Some analysts believe that this massive source of dumping being closed could lead to a bounce in bitcoin prices and trigger a short squeeze. Additionally, Alameda Research dropping its lawsuit against Grayscale over fees and share redemption restrictions further clears the path for GBTC’s future as an ETF. Overall, while the initial impact was negative, there is still potential for bitcoin prices to benefit from the introduction of spot ETFs if market conditions improve and independent of FTX.
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