Why Bitcoin’s Price Dropped Below $40,000
Bitcoin’s price has recently fallen below $40,000, continuing its decline since the approval of Spot Bitcoin ETFs. The defunct crypto exchange FTX has played a significant role in this price drop. FTX sold off a majority of its shares in Grayscale’s Bitcoin Trust (GBTC) after the Bitcoin ETF conversion. This has contributed to Grayscale’s ongoing sales of BTC, which have caused the price of Bitcoin to plummet.
FTX and GBTC Holdings
FTX is not the only investor taking profits from GBTC. After GBTC began trading as a Spot Bitcoin ETF, it experienced outflows of over $2 billion in just five days. Recent reports suggest that FTX’s sale of all their GBTC holdings amounts to almost $1 billion. FTX is likely liquidating its GBTC holdings as part of its repayment plan to customers. FTX’s sister company, Alameda Research, has also been active in the market, potentially contributing to the repayment plan.
Potential Consequences
Bloomberg analyst James Seyffart predicts that the outflows from Grayscale’s GBTC will continue. On January 22 alone, GBTC recorded over $640 million in outflows, the largest single-day outflow at $3.45 billion so far. If this trend continues, it could further negatively impact BTC’s price as Grayscale will have to keep offloading its BTC holdings on the market. With over $21 billion assets under management and a BTC holding of over 573,000, such selling pressure could be disastrous for Bitcoin and the broader crypto market.
The Current State of Bitcoin
As of writing, Bitcoin is trading at around $39,700, down over 3% in the last 24 hours. (Source: CoinMarketCap)
Hot Take: Bitcoin’s Price Drop and the Role of FTX
The recent drop in Bitcoin’s price below $40,000 has been attributed to the actions of FTX and its sale of shares in Grayscale’s Bitcoin Trust (GBTC). As GBTC experiences significant outflows and sells off its BTC holdings, the market is flooded with supply, causing the price of Bitcoin to plummet. This trend may continue as Grayscale continues to offload its BTC holdings. If this happens, it could have severe consequences for both Bitcoin and the broader crypto market. Investors should closely monitor these developments as they could impact their investment strategies.
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