Recent weeks have witnessed a substantial offloading of Grayscale Bitcoin Trust (GBTC), with FTX, a now-defunct crypto exchange, emerging as a key player in this scenario. The reported outflows, estimated at close to $1 billion, are believed to have triggered a notable downturn in the price of Bitcoin (BTC).
According to a CoinDesk report, FTX’s involvement in the GBTC sell-off becomes apparent following the fund’s transition into a Bitcoin spot ETF, gaining approval from federal regulators.
Privately reviewed data, coupled with insights from individuals familiar with the matter, suggests that FTX’s estate has divested itself of a staggering 22 million GBTC shares. An early November filing indicated that as of October 25, FTX held 22.3 million GBTC shares valued at $597 million. At present market prices, these shares would command a value of $798 million.
Two factors have contributed to the surge in share value. Firstly, the rise in Bitcoin’s price from approximately $34,500 on October 25 to the current level of $40,000, reaching a peak of $49,000 earlier this month.
Secondly, the approval and subsequent conversion of GBTC into a Bitcoin spot ETF have eliminated a longstanding discount between GBTC share values and the underlying Bitcoin holdings. In early 2023, GBTC faced a discount of over 40% against the BTC price. With this discount erased, major GBTC holders like FTX have been incentivized to capitalize on profits. On the first day of GBTC trading as a spot ETF, FTX’s share ownership value soared to $900 million.
However, it’s important to note that FTX’s stake wasn’t necessarily sold for that entire amount. Bloomberg ETF analyst James Seyffart indicates that FTX’s selloff was less than $1 billion.
Notably, Alameda Research, FTX’s sister trading firm, had previously filed a lawsuit against Grayscale, alleging exploitative management fees. Following the share sell-off, the lawsuit was dismissed.
The decline of both FTX and Alameda in November 2022 marked Bitcoin’s lowest price in over three years, at $15,500. Subsequent positive developments, including ETF approvals and Grayscale’s legal victories, contributed to Bitcoin’s resurgence over the following year.
Despite these initial successes, Grayscale has witnessed significant outflows, totaling almost $3 billion, with $590.4 million recorded on a recent Friday. On-chain data reveals Grayscale’s Bitcoin selloff, with thousands of BTC being transferred from the firm’s blockchain addresses to Coinbase daily.
