Here’s How FTX Caused Bitcoin’s Price to Drop Below $40K
After Grayscale Bitcoin Trust (GBTC) was converted into an exchange-traded fund (ETF), the bankrupt FTX has now sold approximately $1 billion worth of GBTC shares.
Details of The Sale
FTX, which filed for Chapter 11 Bankruptcy on November 11, 2022, recently sold 22 million shares of GBTC, which were converted into Bitcoin ETFs on January 11 of this year.
This sale means that FTX’s stake in GBTC is now reduced to zero. Prior to the sale, FTX held 22.3 million GBTC shares, valued at $597 million as of October 25, 2023.
The conversion of Grayscale Bitcoin Trust into an ETF was a significant event in the crypto space, especially following the SEC’s approval of multiple new Bitcoin ETFs.
While Bitcoin ETF issuers like Grayscale and Fidelity have seen significant inflows, GBTC has experienced substantial outflows, with FTX’s sales contributing to this decline.
Future Implications
In addition to GBTC, FTX also held shares in five Grayscale trusts and nearly 3 million shares in a statutory trust managed by Bitwise, an ETF provider. These holdings were kept in a brokerage account at ED&F Man Capital Markets, now known as Marex Capital Markets Inc. Both Marex and Galaxy Digital, which is associated with FTX, have not commented on these developments.
On the other hand, FTX’s sister firm, Alameda Research, has voluntarily dropped its lawsuit against Grayscale, which accused the company of charging excessive fees.
Bitcoin Price Movement
Contrary to expectations of a bullish Bitcoin market following the approval of ETFs, the price of Bitcoin has actually declined since their launch. Many analysts believed that Bitcoin ETFs would provide an easier investment opportunity for the general public, leading to positive speculations.
In Conclusion
FTX’s decision to sell GBTC shares has added complexity to the market dynamics. With FTX completing the sale of its significant GBTC holdings, there is speculation that the selling pressure on GBTC may ease. The unique circumstance of a bankruptcy estate liquidating holdings could have contributed to the recent outflows.