The FTX bankruptcy estate has been identified as a key player in the significant outflows from Grayscale’s Bitcoin fund, following its recent conversion to a spot Bitcoin ETF. Private data reveals that FTX sold a staggering 22 million shares from the Bitcoin fund, equivalent to approximately $900 million.
FTX: The Main Contributor to Outflows
FTX, once a titan in the crypto world, liquidated its holdings in the fund, selling 22 million shares valued at $900 million. This substantial sale is part of a larger trend of outflows, totaling around $2 billion worth of shares since the fund’s conversion to an exchange-traded fund. Grayscale’s spot Bitcoin ETF, the first of its kind to begin trading, experienced significantly higher outflows, largely due to FTX offloading its holdings. Prior to its conversion, the GBTC operated as a closed-end fund.
A slew of spot Bitcoin ETFs hit the market on January 11th, following long-awaited approval from the Securities and Exchange Commission (SEC). Despite years of refusals and delays, Grayscale’s fund, which had been operating for over a decade as a closed-end fund, was among the first to be converted into an ETF. At the time of SEC approval, the fund had accumulated nearly $30 billion in assets, alongside 10 newly minted Bitcoin ETFs.
While other funds, including those issued by industry heavyweights BlackRock and Fidelity, saw significant inflows, GBTC experienced a mass exodus of funds, with FTX accounting for a large portion of the withdrawals. Spot Bitcoin net inflows reached nearly $1 billion within just three days, led by BlackRock.
Bitcoin Price Takes a Hit
Contrary to expectations, the price of Bitcoin has fallen since the SEC’s approval of ETFs. The introduction of spot Bitcoin ETFs, hailed as a simpler way for everyday investors to invest in Bitcoin, had sparked optimistic price predictions. However, Bitcoin’s price trajectory defied these forecasts, instead experiencing a downturn.
With FTX having completed the sale of its substantial holdings, the selling pressure on Bitcoin could potentially ease. FTX had capitalized on the price disparity between the 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, according to a filing in November 2023.
On the first day of Grayscale’s Bitcoin ETF trading on NYSE Arca, the value of FTX’s GBTC holdings rose to $900 million, closing 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 known as Marex Capital Markets.