FTX’s Impact on Grayscale Bitcoin Trust
Recent reports suggest that the bankruptcy of FTX, a defunct crypto exchange, may be responsible for a significant decrease in the price of Bitcoin. The reports indicate that FTX has sold nearly $1 billion worth of shares from the Grayscale Bitcoin Trust (GBTC) since the fund transitioned into a Bitcoin spot ETF and gained approval from federal regulators.
FTX’s Massive Dump of GBTC Shares
CoinDesk, citing insider sources, revealed that FTX’s estate has sold off 22 million GBTC shares. A filing from November showed that FTX owned 22.3 million GBTC shares valued at $597 million. Today, those same shares would be worth $798 million due to Bitcoin’s price increase.
Incentive to Realize Profits
The rise in GBTC share value is due to two factors: Bitcoin’s price surge and the conversion of GBTC into a Bitcoin spot ETF. This conversion closed the discount between GBTC shares and its underlying Bitcoin holdings. As a result, major GBTC holders like FTX have an incentive to sell and realize profits. On the first day of trading as a spot ETF, FTX’s share ownership value reached $900 million.
FTX and Alameda Research
Alameda Research, FTX’s sister trading firm, previously sued Grayscale over management fees but dismissed the lawsuit after selling their shares. FTX and Alameda’s initial downfall coincided with Bitcoin reaching its lowest price in three years at $15,500 in November 2022.
Grayscale’s Outflows
Since gaining regulatory approval, Grayscale has experienced significant outflows totaling almost $3 billion, including a recent $590.4 million selloff. These Bitcoin outflows can be observed on-chain, with Grayscale’s blockchain addresses sending large amounts of BTC to Coinbase daily.
Hot Take: FTX’s Actions Affect Bitcoin’s Price
The bankruptcy of FTX and its subsequent sale of GBTC shares has had a noticeable impact on Bitcoin’s price. With the increase in GBTC share value and the incentive for major holders like FTX to sell, it is likely that FTX’s actions have contributed to the recent downturn in Bitcoin’s price. This highlights the interconnected nature of the crypto market and the influence that significant players can have on prices.
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