Sources reveal that FTX managed to sell about $1 billion of Grayscale's Bitcoin ETF, highlighting a significant portion of the outflow. Investors quickly withdrew more than $2 billion from the Grayscale Bitcoin Trust (GBTC) following its recent conversion to an exchange-traded fund. Integral to this massive outflow was the bankruptcy ownership of FTX, which divested 22 million shares, insights inferred from insider information.
Despite the surge in new spot bitcoin ETFs following SEC approval on Jan. 11, Grayscale, with nearly a decade of history as a closed-end fund, faced significant redemptions. The SEC's approval to convert GBTC into an ETF, accompanied by the approval of 10 new bitcoin ETFs by major players such as BlackRock and Fidelity, caused an unforeseen shift.
FTX Sells 22 Million GBTC Shares FTX, a major player in this story, sold 22 million GBTC shares, losing its ownership and accounting for nearly $1 billion. Bitcoin's value fell after the ETF was approved, contrary to the optimistic expectations attached to the SEC's decision, in stark contrast to the expected positive impact on BTC prices.
Now that FTX has completed its significant sale, the market may experience relief, as bankruptcy liquidations of this magnitude are rare. FTX, like other major crypto traders, seized the opportunity presented by the price difference between Grayscale trust shares and the net asset value of the underlying bitcoin.
FTX's holdings of 22.3 million GBTC, valued at $597 million as of Oct. 25, 2023, rose to about $900 million on Jan. 11, the first day of trading in Grayscale's bitcoin ETF on NYSE Arca. The securities account at ED&F Man Capital Markets (now Marex Capital Markets Inc.) held FTX shares in five Grayscale trusts, along with nearly 3 million shares in a statutory trust managed by Bitwise.
Both Marex Capital Markets Inc. and Galaxy Digital, which helped sell assets through FTX's bankruptcy holdings, declined to comment on the unfolding developments. This landslide in the landscape of GBTC sheds light on the complex dynamics within the cryptocurrency market and its susceptibility to regulatory decisions.
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"These data highlight significantly stronger profitability in the mining sector compared to the challenges experienced in 2022 and part of 2023."
In about six months, Bitcoin will undergo a "halving," in which new bitcoins awarded to miners will be halved. Satoshi Nakamoto introduced this event in 2009 as an anti-inflationary measure. About every four years, the period before halving traditionally proves to be the most profitable time for crypto investors. "Bitcoin buying six months before a halving and selling 18 months after has historically outperformed a 'buy and hold' strategy," the analyst confirms.