The crypto exchange FTX, which filed for bankruptcy in October 2023, has sold its entire stake in the Grayscale Bitcoin Trust (GBTC), the largest and oldest bitcoin exchange-traded fund (ETF) in the U.S. market. The sale, which amounted to about $1 billion, explains part of the massive outflows from the fund since it was converted into an ETF earlier this month.

**FTX’s GBTC Arbitrage Strategy**

FTX, like other large crypto trading entities, had previously capitalized on the price difference between Grayscale trust shares and the net asset value (NAV) of the underlying bitcoin. This strategy, known as GBTC arbitrage, involved buying GBTC shares at a discount, locking them up for six months, and then selling them at a premium when they became liquid.

As of Oct. 25, 2023, FTX held 22.3 million GBTC shares, valued at $597 million, according to a Nov. 3 filing. On Jan. 11, 2024, the day Grayscale’s Bitcoin ETF commenced trading on NYSE Arca, the value of FTX’s holdings rose to approximately $900 million.

**FTX’s GBTC Liquidation**

According to data reviewed by CoinDesk, FTX’s bankruptcy estate sold 22 million GBTC shares, reducing its stake to zero. The sale of its shares was valued at nearly $1 billion, accounting for half of the $2 billion in outflows from the fund since it was converted into an ETF.

The liquidation of FTX’s GBTC holdings was assisted by Marex Capital Markets Inc. and Galaxy Digital, which declined to comment on the matter. In a related development, Alameda Research, a trading firm associated with FTX, voluntarily withdrew a lawsuit that alleged Grayscale charged exorbitant fees.

**GBTC’s ETF Conversion and Competition**

The conversion of GBTC to an ETF came as the U.S. Securities and Exchange Commission (SEC) greenlit the trading of several spot bitcoin ETFs on Jan. 11, following prolonged delays. The Grayscale fund, which had been operating for a decade as a closed-end fund, amassed nearly $30 billion in assets before its conversion.

Simultaneously, the SEC approved 10 new bitcoin ETFs, issued by major players like BlackRock and Fidelity. These funds, which offer lower fees and better tracking of bitcoin’s price, have seen inflows of over $1.5 billion in the first week of trading, while GBTC has experienced substantial withdrawals.

**Bitcoin’s Price Reaction**

Bitcoin’s (BTC) price has experienced a notable decline since the approval of these ETFs, contrasting with the earlier optimism surrounding the SEC’s decision. Bitcoin ETFs were anticipated to offer an easier investment avenue for the general public, leading to optimistic predictions about bitcoin’s price.

However, some analysts have pointed out that the ETFs may have a negative impact on bitcoin’s price in the short term, as they divert demand away from the spot market and create selling pressure from existing GBTC holders. In theory, now that FTX is done selling its substantial holdings, the selling pressure could ease since a bankruptcy estate liquidating holdings is a relatively unique event.

Sources:

[Markets Insider](https://www.msn.com/en-us/money/markets/ftx-selling-1-billion-of-grayscales-bitcoin-etf-has-spurred-major-outflows-from-the-fund-since-sec-approval-report-says/ar-BB1h5HdO)
[Markets Insider](https://www.msn.com/en-us/money/markets/ftx-selling-1-billion-of-grayscales-bitcoin-etf-has-spurred-major-outflows-from-the-fund-since-sec-approval-report-says/ar-BB1h5HdO)
[CoinDesk](https://www.msn.com/en-us/money/markets/bitcoin-bulls-buoyed-by-report-of-ftxs-1b-gbtc-sale/ar-BB1h5DXG)
[CoinDesk](https://www.coindesk.com/business/2024/01/22/ftx-sold-about-1b-of-grayscales-bitcoin-etf-explaining-much-of-outflow-sources/)
[Cryptonews](https://cryptonews.com/news/just-in-ftxs-bankruptcy-estate-sold-22-million-gbtc-shares-leading-to-1-billion-gbtc-outflow.htm)




The bankrupt crypto exchange FTX liquidated its $1 billion stake in Grayscale’s Bitcoin Trust (GBTC), the oldest and largest U.S. bitcoin ETF. This explains half of the fund’s outflows since it became an ETF this month.

Mon Jan 22 2024 FTX’s Bankruptcy Estate Sold $1 Billion of Grayscale’s Bitcoin ETF

Mon Jan 22 2024

FTX’s Bankruptcy Estate Sold $1 Billion of Grayscale’s Bitcoin ETF