FTX’s Bankruptcy Forces $1 Billion GBTC Dump, Leading to Significant BTC Price Decline

FTX, despite being bankrupt, has managed to sell all of its shares in Grayscale Bitcoin Trust (GBTC) after they were converted into exchange-traded funds (ETFs). This unexpected move has caused quite a stir in the cryptocurrency industry, especially considering FTX’s bankruptcy status.

The sale involved a significant amount of 22 million GBTC shares, which were converted into Bitcoin ETFs on January 11. As a result, FTX no longer holds any stake in GBTC. Prior to the sell-off, FTX had a substantial 22.3 million GBTC shares valued at $597 million as of October 25, 2023.

The conversion of GBTC into ETFs was a significant milestone and coincided with the approval of multiple new Bitcoin ETFs by the SEC. While issuers like Grayscale and Fidelity are seeing a surge of inflows into their Bitcoin ETFs, GBTC is experiencing significant outflows, with FTX’s sell-off playing a major role.

FTX’s cryptocurrency portfolio extends beyond GBTC and includes shares in five other Grayscale trusts, as well as nearly 3 million shares in a statutory trust managed by ETF provider Bitwise. The details of these holdings, previously held in a brokerage account at ED&F Man Capital Markets (now Marex Capital Markets Inc.), are currently under scrutiny. Marex and Galaxy Digital, associated with these holdings, have chosen not to disclose any information about these developments.

On a separate note, Alameda Research, FTX’s sister company, has voluntarily dropped its lawsuit against Grayscale, which accused the company of charging excessive fees.

Contrary to expectations, the price of Bitcoin has actually fallen significantly after the frenzy surrounding the approval of ETFs. Analysts had anticipated a bullish surge, believing that Bitcoin ETFs would provide an easy entry point for general investors into the cryptocurrency market.

With FTX completing the sale of its GBTC holdings, there is speculation that the selling pressure on GBTC may ease. The unique situation of a bankruptcy estate liquidating such holdings could be a contributing factor to the recent outflows.

Tags: Bitcoin, Price Analysis