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Home ยป FTX Sparks $2 Billion Grayscale Bitcoin ETF Exodus: Insights and Impact

FTX Sparks $2 Billion Grayscale Bitcoin ETF Exodus: Insights and Impact

FTX's massive GBTC sell-off and its aftermath: Decrypting the implications for Bitcoin's price and market dynamics.

by Alexander
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Investors have withdrawn over $2 billion from the Grayscale Bitcoin Trust (GBTC) since its conversion into an exchange-traded fund (ETF) earlier this month. Notably, FTX bankruptcy estate played a significant role, offloading 22 million shares, accounting for close to $1 billion of the total exodus.

With the approval of spot bitcoin ETFs by the U.S. Securities and Exchange Commission on January 11, several new funds, including those from BlackRock and Fidelity, experienced inflows. However, the conversion of the Grayscale fund, already existed for a decade, led to a substantial outflow, contrary to market expectations.

FTX’s Substantial Role in GBTC Outflow

FTX’s sale of 22 million GBTC shares, reducing its ownership to zero, played a crucial role in the Grayscale outflow. The holdings were valued at $597 million as of October 25, 2023, and surged to approximately $900 million on the first day of Grayscale’s Bitcoin ETF trading.

Bitcoin’s Price Movement Amid ETF Approval

Despite optimistic forecasts for Bitcoin’s price following the ETF approval, its value experienced a decline. FTX’s completion of selling its substantial holdings could potentially alleviate selling pressure, considering a bankruptcy estate liquidating holdings is a unique event.

FTX: Strategy and Market Dynamics

Similar to other large crypto trading entities, FTX seized opportunities in the price disparity between Grayscale trust shares and the net asset value of underlying bitcoin. FTX initially held 22.3 million GBTC valued at $597 million, according to a filing from November 3, 2023. The subsequent rise in the value of FTX’s GBTC holding, coupled with the conversion to an ETF, prompted the sale of assets.

On Monday, Alameda Research, a trading firm linked to FTX, dismissed a lawsuit alleging Grayscale charged excessive fees. Galaxy Digital, assisting in the sale of FTX’s bankruptcy estate assets, and Marex Capital Markets Inc. (formerly ED&F Man Capital Markets), where FTX held shares, declined to comment.

As Bitcoin ETFs reshape the market, the dynamics of fund conversions and strategic moves by major players like FTX continue to influence the evolving landscape.

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