January 23, 2024

FTX Offloads Nearly $1 Billion of Grayscale's Bitcoin ETF

With FTX completing the sale of its significant holdings, the pressure on selling is expected to ease, given that a bankruptcy estate liquidating holdings is a relatively rare occurrence.

Investors have divested over $2 billion in the Grayscale Bitcoin Trust (GBTC) since its conversion into an exchange-traded fund earlier this month. A substantial portion of this outflow can be attributed to FTX's bankruptcy estate, which unloaded 22 million shares.

The trading of several spot bitcoin ETFs commenced on January 11 after the U.S. Securities and Exchange Commission granted approval following years of delays. However, the Grayscale fund, structured as a less appealing closed-end fund, had already amassed nearly $30 billion in assets when the SEC approved its transition to an ETF, along with endorsing 10 newly established bitcoin ETFs.

Despite inflows into the newly launched funds by BlackRock and Fidelity, GBTC witnessed the withdrawal of billions of dollars in bitcoin. Data indicates that a significant portion of this withdrawal was orchestrated by FTX. The 22 million shares it divested, reducing FTX's GBTC ownership to zero, amounted to nearly $1 billion.

Since the approval of bitcoin ETFs, the price of bitcoin has experienced a decline, in contrast to the optimistic expectations preceding the SEC's decision. BTC ETFs were anticipated to provide an easier entry point for mainstream investors, generating optimistic forecasts for BTC's price. However, the opposite occurred. With FTX concluding the sale of its substantial holdings, the selling pressure is expected to alleviate, considering that a bankruptcy estate liquidating holdings is a relatively infrequent event.

Similar to many prominent crypto trading entities, FTX took advantage of the price disparity between Grayscale trust shares and the net asset value of the underlying bitcoin in the fund. As of October 25, 2023, FTX held 22.3 million GBTC valued at $597 million, according to a filing on November 3, 2023.

The value of FTX's GBTC holding rose to approximately $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 maintained shares in five Grayscale trusts and nearly 3 million shares in a statutory trust managed by ETF provider Bitwise, held in a brokerage account at ED&F Man Capital Markets, now known as Marex Capital Markets Inc., according to filings.

On Monday, Alameda Research, a trading firm affiliated with FTX, voluntarily dropped a lawsuit accusing Grayscale of charging excessive fees.

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