The approval of bitcoin ETFs has coincided with a decline in BTC’s price. The recent completion of FTX’s substantial sell-off of its holdings might alleviate the selling pressure, as the liquidation of a bankruptcy estate’s holdings is a relatively uncommon occurrence.
Investors have divested over $2 billion from the Grayscale Bitcoin Trust (GBTC) since its conversion into an exchange-traded fund earlier this month. A significant portion of this exodus can be attributed to FTX’s bankruptcy estate, which offloaded 22 million shares, according to private data reviewed by CoinDesk and sources familiar with the matter.
While several spot bitcoin ETFs began trading on January 11, after the U.S. Securities and Exchange Commission’s long-awaited approval, the Grayscale fund had already been in existence for a decade, structured as a less appealing closed-end fund. It had amassed nearly $30 billion in assets when the SEC approved its transition to an ETF, along with the endorsement of 10 newly created bitcoin ETFs.
Despite the inflows into new funds offered by industry giants like BlackRock and Fidelity, billions of dollars’ worth of bitcoin have been withdrawn from GBTC. Data reviewed by CoinDesk indicates that FTX played a substantial role in this exodus. The 22 million shares it sold, wiping out FTX’s GBTC ownership, amounted to almost $1 billion.
The price of Bitcoin (BTC) has experienced a decline since the approval of ETFs, contrary to the optimistic expectations preceding the SEC’s decision. Bitcoin ETFs were envisioned as a more accessible way for regular investors to enter the bitcoin market, leading to overly optimistic predictions for BTC’s price.
With FTX completing the sale of its significant holdings, the selling pressure might ease, considering that a bankruptcy estate liquidating its holdings is a relatively rare event.
Similar to other large crypto trading entities, FTX seized opportunities arising from the price difference between Grayscale trust shares and the net asset value of the underlying bitcoin. As of October 25, 2023, FTX held 22.3 million GBTC valued at $597 million, as per a November 3, 2023 filing. The value of FTX’s GBTC holding increased to around $900 million on the first day of Grayscale’s bitcoin ETF trading on NYSE Arca on January 11, closing the session at $40.69.
FTX held shares in five Grayscale trusts and nearly 3 million shares in a statutory trust managed by ETF provider Bitwise, in a brokerage account at ED&F Man Capital Markets, now known as Marex Capital Markets Inc., according to filings.
Marex declined to comment, and Galaxy Digital, a crypto trading specialist aiding in the sale of assets from the FTX bankruptcy estate, also refrained from commenting.
On Monday, Alameda Research, a trading firm linked to FTX, voluntarily dismissed a lawsuit alleging that Grayscale had charged excessive fees.
