FTX Estate Unloads Majority of Grayscale Bitcoin Trust Holdings

FTX holdings in GBTC amounted to 22.28 million shares, with over two-thirds liquidated during the initiation of spot ETF trading.

FTX Estate Rapidly Sells Off GBTC Shares

The bankrupt FTX crypto exchange estate has reportedly sold most of its holding in the Grayscale Bitcoin Trust ETF within the initial three days of trading, as per two sources. Yes, you heard it right. The estate representing the unsuccessful hedge funds and crypto exchange FTX Alameda Research has reportedly divested over two-thirds of Grayscale Bitcoin Trust (GBTC) shares, as stated in a Bloomberg report on January 22.

The information comes from two people who are familiar with the situation.  The sale could have generated a minimum of $600 million for the FTX estate.

The FTX estate reportedly possessed 22.28 million shares, valued at $902 million, of the GBTC before January 11, when the trust underwent conversion into a spot ETF. FTX liquidated the majority of its shares in the subsequent three days of trading, as per the report. This suggests its current holding is below 8 million shares, with an estimated value of about $281 million.

Alameda Research Lawsuit, Grayscale’s Transformation and the Evolution of GBTC

In March, Alameda Research filed a lawsuit against Grayscale, alleging excessive fees. Within the legal action, Alameda asserted that Grayscale implemented a “self-imposed restriction,” preventing shareholders from obtaining the Bitcoin held by its trust. Before Jan. 11, most investors could not exchange their shares for the trust’s actual Bitcoin.

Before  June 15, even the trust’s share price was 44% lower than the value of the Bitcoin it symbolized, leaving investors unable to redeem their shares for the underlying cryptocurrency.

However, on Jan. 11, redemptions for authorized participants became available, following the approval by the United States SEC for the conversion of the Grayscale Trust into an ETF, a process that encountered several years of delays.

However, the Grayscale fund had been in existence for ten years, configured as a less appealing fund. It had gathered nearly $30 billion in assets by the time the SEC approved its transformation into an ETF, endorsing other 10 newly established bitcoin ETFs as well.

As the anticipated approval date approached, the discount of GBTC shares compared to the net asset value declined to 1.55%, as per YCharts data. This brought the share price closer to the value of the Bitcoin it represented. Currently, GBTC is just 0.27% below its net asset value per share.

Since January 11, the Grayscale Bitcoin Trust has witnessed the sale of over $700 million worth of Bitcoin, and some analysts suggest that investors are leaving the fund due to perceived high fees. On January 22, Alameda, a trading firm affiliated with FTX, withdrew its lawsuit against Grayscale.

Bitcoin’s Price Decreased After ETF Approval

Bitcoin’s value has fallen following the approval of ETFs, a sharp contrast to the optimistic expectations before the SEC’s decision. Bitcoin ETFs were seen as a simpler means for regular individuals to invest in Bitcoin, sparking overly positive predictions for BTC’s price. 

On the contrary, Bitcoin has experienced a decline. Theoretically, with FTX completing the sale of its significant holdings, the pressure to sell could diminish, as the liquidation of holdings by a bankruptcy estate is a relatively uncommon occurrence.