FTX Behind GBTC Outflows Approaching 1 Billion Dollars

The now-defunct FTX crypto exchange is reportedly responsible for a substantial outflow, approaching $1 billion, from the Grayscale Bitcoin Trust (GBTC) this month.

FTX Behind GBTC Outflows Approaching 1 Billion Dollars

This series of outflows, linked to FTX’s bankruptcy, is believed to have contributed significantly to the recent downturn in the price of Bitcoin (BTC). According to a recent report from CoinDesk, FTX’s bankruptcy proceedings involved the sale of nearly $1 billion worth of GBTC after the fund underwent a transition into a Bitcoin spot ETF and received approval from federal regulators.

FTX’s Impact on Bitcoin: A Suppression?

According to CoinDesk, citing privately reviewed data and insights from two individuals familiar with the situation, the estate linked to FTX has reportedly offloaded 22 million GBTC shares. A filing from early November indicated that FTX held 22.3 million GBTC shares valued at $597 million as of October 25. Presently, at the current market price, these shares would be valued at $798 million.

The increase in share value is attributed to two key factors. Firstly, the surge in Bitcoin’s price, rising from around $34,500 on October 25 to the current level of $40,000, including a peak of $49,000 earlier this month. Secondly, the approval and subsequent conversion of GBTC into a Bitcoin spot ETF has eliminated a long-standing discount between the value of GBTC shares and the fund’s underlying Bitcoin holdings. In early 2023, GBTC was discounted by over 40% against the price of BTC.

With the discount now eliminated, major GBTC holders, including FTX, are motivated to capitalize on profits. On the first day of GBTC trading as a spot ETF, the value of FTX’s share ownership surged to $900 million.

However, it’s essential to note that the reported $900 million value doesn’t necessarily reflect the entire proceeds from FTX’s stake sale. According to Bloomberg ETF analyst James Seyffart, FTX’s selloff was less than $1 billion.