FTX responsible for nearly one billion dollars outflow from GBTC ETF

The collapsed cryptocurrency exchange FTX may be behind the tsunami of outflows from Grayscale Bitcoin Trust (GBTC) this month, potentially causing a significant drop in the price of bitcoin. A recent report from CoinDesk suggests that FTX sold GBTC shares worth nearly one billion dollars since the fund converted to a spot ETF.

Is FTX suppressing the price of bitcoin?

CoinDesk cited privately reviewed data from two individuals who reportedly have insider information. They stated that FTX sold 22 million shares of GBTC.

A filing from early November showed that FTX held 22.3 million GBTC shares valued at 597 million dollars as of October 25. At today’s price, those same shares would be worth 798 million dollars.

The increase in share value occurred for two reasons. First, the price of bitcoin rose from approximately 34,500 on October 25 to 40,000 today, including 49 thousand dollars earlier this month.

Second, the approval and subsequent conversion of GBTC into a spot bitcoin ETF closed the long-prevailing discount between the value of GBTC shares and the bitcoin held by the fund. At the beginning of 2023, GBTC was discounted by more than 40 percent compared to the price of bitcoin.

With the closing of the discount and the return of share prices to normal value after the ETF approval, large GBTC holders like FTX are making profits. On the first day that GBTC traded as a spot ETF, the value of FTX’s share ownership was 900 million dollars.

But that does not mean the company sold its stake for that much. According to Bloomberg ETF analyst James Seyffart, the total amount of FTX’s sales was less than one billion dollars.

Outflow of capital from GBTC

Alameda Research, FTX’s sister trading firm, previously sued Grayscale for imposing exploitative management fees on the fund. However, after selling the shares, the company dropped the lawsuit.

The collapse of FTX and Alameda was responsible for the lowest bitcoin price in over 3 years at 15,500 dollars in November 2022. The excitement over the ETF approval and Grayscale’s success against federal regulators in court fueled the rise of bitcoin throughout 2023.

Since the approval, however, Grayscale has suffered nearly 3 billion dollars in outflows, including 590.4 million dollars on Friday. Their bitcoin sell-off is visible on the blockchain, with publicly known addresses sending thousands of bitcoins to Coinbase daily.