According to a report from CoinDesk, investors have offloaded more than $2 billion worth of the Grayscale Bitcoin Trust (GBTC) following its transition into an exchange-traded fund (ETF) earlier this month. A significant portion of this sell-off was driven by FTX's bankruptcy estate, which unloaded 22 million shares, as per private data reviewed by CoinDesk and confirmed by two individuals with knowledge of the situation.
On January 11th, a number of spot bitcoin ETFs commenced trading following the U.S. Securities and Exchange Commission's (SEC) approval, ending years of delays. However, the Grayscale fund, which had been in existence for a decade, was already structured as a less appealing closed-end fund and had amassed nearly $30 billion in assets prior to its conversion to an ETF. The SEC also gave the green light to 10 new bitcoin ETFs.
While the new ETFs, launched by established firms like BlackRock and Fidelity, have attracted investments, GBTC has seen a massive outflow of bitcoin, amounting to billions of dollars.
The data CoinDesk obtained indicates that FTX was responsible for a significant portion of this sell-off.
The 22 million shares it offloaded reduced FTX's GBTC holdings to zero, with these shares being worth nearly $1 billion.
Since the approval of the ETFs, there has been a downward trend in Bitcoin's price, contrasting sharply with the high expectations that preceded the SEC's decision. Bitcoin ETFs were expected to make it easier for the average person to invest in bitcoin, leading to largely optimistic price predictions for BTC.
However, the opposite has occurred. Now that FTX has sold its substantial holdings, the selling pressure may decrease, given that a bankruptcy estate liquidating its assets is a relatively rare occurrence.
FTX, like many other large crypto trading platforms, capitalized on the price discrepancy between the shares of the Grayscale trust and the net asset value of the underlying bitcoin in the fund. FTX held 22.3 million GBTC, valued at $597 million as of October 25, 2023, according to a filing from November 3, 2023.
The value of FTX's GBTC holding increased to around $900 million on day one of Grayscale's bitcoin ETF trading on NYSE Arca on January 11, when it closed the trading session at $40.69.
FTX held shares in five Grayscale trusts (as well as almost 3 million shares in a statutory trust managed by ETF provider Bitwise) in a brokerage account at ED&F Man Capital Markets, which is now known as Marex Capital Markets Inc., according to filings.
On Monday, January 22, Alameda Research – a trading firm associated with FTX – voluntarily dropped a lawsuit against Grayscale which alleged that they were charging excessive fees.
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