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FTX Estate Sells Majority of Grayscale Bitcoin ETF

Key Takeaways
  • FTX's bankruptcy estate offloaded $2 billion from GBTC, selling 22 million shares and reducing FTX's ownership to zero.
  • Despite major firms like BlackRock and Fidelity launching ETFs, Bitcoin's value declined post-SEC approval, disappointing optimistic projections.
  • FTX's completion of the GBTC sell-off sparks speculation of reduced selling pressure on Bitcoin, with observers closely monitoring broader market impacts.
23-Jan-2024 By: Sudeep Saxena
FTX Estate Sells Maj

Grayscale Faces Backlash In Market Meltdown from Bitcoin ETF Sell-Offs

Investors have offloaded more than $2 billion worth of the Grayscale Bitcoin Trust (GBTC). The information from two sources familiar with the situation reveals that a significant portion of this selling activity is attributed to FTX's bankruptcy estate, which disposed of 22 million shares.

While a series of spot bitcoin ETFs began trading on January 11, following the long-awaited approval from the U.S. Securities and Exchange Commission (SEC), the Grayscale fund, in its less attractive closed-end fund structure, had been in existence for a decade.

It had amassed nearly $30 billion in assets by the time the SEC approved its conversion to an ETF, along with granting approval for 10 newly created bitcoin ETFs.

FTX's Impact on GBTC Outflows and ETF Approval Repercussions

In the wake of the recent approval and launch of new bitcoin exchange-traded funds (ETFs) by prominent firms like BlackRock and Fidelity, the Grayscale Bitcoin Trust (GBTC) has experienced substantial outflows, with billions of dollars in bitcoin being withdrawn.

Notably, data examined by CoinGabbar indicates that FTX played a significant role in this exodus, liquidating 22 million shares valued at nearly $1 billion, ultimately reducing FTX's ownership of GBTC to zero.

The approval of bitcoin ETFs was anticipated with great optimism, particularly as major financial institutions such as BlackRock and Fidelity entered the space. However, contrary to expectations, the price of Bitcoin (BTC) has seen a decline following the SEC's approval. Bitcoin ETFs were initially hailed as a more accessible avenue for mainstream investors to enter the bitcoin market, fueling optimistic projections for BTC's value.

With FTX completing the sale of its considerable GBTC holdings, which marked a unique event in the context of a bankruptcy estate liquidating assets, there is speculation that selling pressure on bitcoin could ease. As the market adjusts to this development, observers are keen to see how it might influence the broader cryptocurrency landscape.

Key Factors Driving the Intense Criticism of Grayscale and Contributing to the Market Downturn

The Grayscale Bitcoin Trust (GBTC) has become a focal point in recent market dynamics, marked by investors offloading over $2 billion worth of assets. A significant catalyst behind this selling spree is attributed to FTX's bankruptcy estate, which notably liquidated 22 million GBTC shares, totaling close to $1 billion and reducing FTX's ownership to zero.

The market backdrop reveals a broader context, where the approval and launch of new bitcoin exchange-traded funds (ETFs) by major players like BlackRock and Fidelity were anticipated to bring optimism. We have also seen a good amount of trading volume on the first day of Spot Bitcoin ETF approval.

However, a contrasting reality unfolded as Bitcoin (BTC) experienced a decline in value post-SEC approval. The initial enthusiasm surrounding Bitcoin ETFs as a more accessible avenue for mainstream investors did not translate into the expected surge in BTC prices.

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