FTX Offloaded Nearly $1 Billion Worth of Grayscale’s Bitcoin ETF, Clarifying a Significant Portion of the Outflow: Insider Sources

BTC’s value has declined following the approval of bitcoin ETFs. Notably, FTX has completed the sale of its substantial GBTC holdings, potentially alleviating selling pressure, as the liquidation of a bankruptcy estate’s assets is a relatively uncommon occurrence.

Investors have divested over $2 billion from the Grayscale Bitcoin Trust (GBTC) since its transformation into an exchange-traded fund earlier this month. A significant portion of this outflow, approximately 22 million shares, originated from FTX’s bankruptcy estate, as per private data reviewed by CoinDesk and insights from two individuals familiar with the matter.

A wave of spot bitcoin ETFs entered the market on January 11 after the U.S. Securities and Exchange Commission granted approval following years of delays. However, the Grayscale fund, structured as a less attractive closed-end fund, had already been in existence for a decade. When the SEC sanctioned its conversion into an ETF, along with the approval of 10 newly created bitcoin ETFs, it had amassed nearly $30 billion in assets.

While the newly issued funds from entities like BlackRock and Fidelity experienced inflows, GBTC witnessed the withdrawal of billions of dollars’ worth of bitcoin. FTX appears to have played a significant role in this trend, with the sale of 22 million shares, reducing its GBTC ownership to zero and amounting to nearly $1 billion.

Bitcoin’s price has experienced a decline since the approval of ETFs, contrary to the optimistic expectations preceding the SEC’s decision. Despite predictions of a bullish trajectory for BTC’s price through the accessibility offered by bitcoin ETFs, the actual outcome has been a fall in value. With FTX completing the sale of its substantial holdings, there is a possibility that selling pressure may ease, considering the uniqueness of a bankruptcy estate’s liquidation.

Similar to many large crypto trading entities, FTX took advantage of the price disparity between Grayscale trust shares and the net asset value of the underlying bitcoin in the fund. As of October 25, 2023, FTX held 22.3 million GBTC valued at $597 million. By the first day of Grayscale’s bitcoin ETF trading on NYSE Arca on January 11, the value of FTX’s GBTC holding had risen to around $900 million, closing the session at $40.69.

FTX held shares in five Grayscale trusts, along with nearly 3 million shares in a statutory trust managed by ETF provider Bitwise, in a brokerage account at ED&F Man Capital Markets, now known as Marex Capital Markets Inc., according to filings. Marex declined to comment, and Galaxy Digital, aiding in the asset sale of the FTX bankruptcy estate, also refrained from commenting. On Monday, Alameda Research, connected to FTX, voluntarily dismissed a lawsuit alleging excessive fees charged by Grayscale.