The FTX bankruptcy estate is responsible for a significant chunk of outflows from Grayscale’s Bitcoin fund since its conversion to a spot Bitcoin ETF earlier this month.
According to private data, FTX reportedly sold 22 million shares from the Bitcoin fund, worth around $900 million.
FTX Responsible For Most Outflows
The fallen crypto giant zeroed out its holdings in the fund after selling 22 million shares worth $900 million. The substantial figure is part of a much larger wave of outflows amounting to around $2 billion worth of shares since the fund became an exchange-traded fund. Grayscale’s spot Bitcoin ETF was the first to begin trading, and its significantly higher outflows can be attributed to FTX selling its holdings. Before being converted to an ETF, the GBTC was a closed-end fund.
A bunch of spot Bitcoin ETFs began trading on the 11th of January after the Securities and Exchange Commission finally gave them the green light after years of refusals and delays. However, Grayscale’s fund had been in existence for over a decade but was structured as a closed-end fund. By the time the SEC approved its conversion into an ETF, the fund had amassed nearly $30 billion worth of assets, along with 10 newly created Bitcoin ETFs.
While other funds, such as the likes of the ones issued by BlackRock and Fidelity, saw significant inflows, GBTC saw billions of dollars pulled out, with FTX accounting for much of that. Spot Bitcoin net inflows touched nearly $1 billion after just three days, with BlackRock leading the way.
Bitcoin Price Tumbles
Meanwhile, the price of Bitcoin has seen a drop since the approval of ETFs by the SEC. This contrasts sharply with the hopes that the Bitcoin price would react positively once the SEC approved spot Bitcoin ETFs. Spot Bitcoin ETFs were hailed as an easier way to allow regular investors to invest in Bitcoin. This led to optimistic forecasts when it came to the price of Bitcoin. Instead, Bitcoin reacted contrary to what many believed, with the price dropping.
With FTX concluding the selling of its substantial holdings, the selling pressure could ease moving forward. FTX capitalized on the disparity between the price of the Grayscale trust shares and the net asset value of the underlying Bitcoin held in the fund. FTX held 22.3 million GBTC, which were valued at $597 million, as of the 25th of October, 2023, according to a November 2023 filing.
Based on the first day of Grayscale’s bitcoin ETF trading on NYSE Arca, the value of FTX’s GBTC holdings increased to $900 million when it closed the trading session at around $40. FTX also held shares in five Grayscale Trusts and nearly 3 million shares in a statutory trust managed by ETF provider Bitwise in a brokerage account at ED&F Man Capital Markets, now called Marex Capital Markets.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
