Defunct crypto exchange FTX may be behind a tsunami of outflows from the Grayscale Bitcoin Trust (GBTC) this month – and by extension, may have caused a significant downturn in Bitcoin (BTC)’s price.
A recent report from CoinDesk suggested that the FTX bankruptcy has sold off close to $1 billion worth of GBTC since the fund transitioned into a Bitcoin spot ETF and was approved by federal regulators.
Is FTX Suppressing Bitcoin?
CoinDesk cited privately reviewed data alongside two people “familiar with the matter,” who said that the estate has dumped 22 million GBTC shares.
A filing from early November showed that FTX held 22.3 million GBTC shares valued at $597 million as of October 25. At today’s price, those same shares would be worth $798 million.
The rise in share value has occurred for two reasons. Firstly, Bitcoin’s price has risen from roughly $34,500 on October 25 to $40,000 today, including a high of $49,000 earlier this month.
Secondly, the approval and subsequent conversion of GBTC into a Bitcoin spot ETF has closed a long prevailing discount between the value of GBTC shares and the fund’s underlying Bitcoin holdings. In early 2023, GBTC was more than 40% discounted against the price of BTC.
With the discount erased, big GBTC holders like FTX are incentivized to realize profits. On the first day that GBTC traded as a spot ETF, the value of FTX’s share ownership ran up to $900 million.
But that doesn’t mean the company sold its stake for that much. According to Bloomberg ETF analyst James Seyffart, FTX’s selloff was less than $1 billion.
Alameda Research – FTX’s sister trading firm – previously sued Grayscale for inflicting exploitative management fees on its funds’ shareholders. After selling their shares, however, the firm dismissed the lawsuit.
The initial fall of both FTX and Alameda marked Bitcoin’s lowest price in over three years at $15,500 in November 2022. Excitement over ETF approvals and Grayscale’s success against federal regulators in court helped propel the asset over the following year.
Since the approvals, however, Grayscale has suffered almost $3 billion of outflows, including $590.4 million on Friday. Their Bitcoin selloff is visible on-chain, with the firm’s blockchain addresses sending thousands of BTC to Coinbase each day.