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Why Did FTX Dump Most of its Grayscale Bitcoin Trust Shares?

2 mins
Updated by Ciaran Lyons
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In Brief

  • FTX rapidly sold nearly 75% of its Grayscale Bitcoin Trust Shares (GBTC) within days, as reported recently.
  • Sources familiar with the situation estimate that the sale may have generated close to $600 million in proceeds for the FTX estate.
  • It was revealed that the FTX estate sold over "two thirds" of its 22.28 million GBTC shares, according to sources familiar with the matter.
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The now-defunct cryptocurrency exchange FTX has reportedly sold off nearly 75% of its Grayscale Bitcoin Trust Shares (GBTC) within a matter of days, according to recent reports.

Sources familiar with the situation suggest that the sale may have secured approximately $600 million.

FTX Rapidly Offloaded Millions of GBTC Shares

According to a recent report, the FTX estate recently sold over “two thirds” of the 22.28 million shares it held, which cited sources familiar with the matter.

In September 2023, the court approved the FTX estate to liquidate over $3.6 billion worth of assets. While it has caused some fear among the crypto community how it will impact prices of those assets, it is needed to be done to repay victims of the exchange, which collapsed in November 2022.

John Hoffman, the managing director of sales and distribution at Grayscale, expressed his belief that the volatility of GBTC will only persist in the near future.

“Broadly speaking, large capital markets ETFs are used in a variety of investing strategies, and we anticipate GBTC’s diverse shareholder base will continue to deploy strategies that impact inflows and outflows.”

However, Grayscale’s GBTC has been around for almost a decade. It launched in 2013. This was originally only available on over-the-counter (OTC) markets. These are decentralized markets for stocks that aren’t listed on major exchanges.

Meanwhile, the United States Securities and Exchange Commission (SEC) greenlit the conversion of GBTC into a Bitcoin exchange-traded fund (ETF). This came amid the approval of 11 spot Bitcoin ETF applications on Jan 10.

However, according to Grayscale, the GBTC owns approximately over 3% of all Bitcoin in circulation.

Read more: FTX Collapse Explained: How Sam Bankman-Fried’s Empire Fell

GBTC Shares Net Asset Value Narrows to 0%

However, Grayscale Investments itself, recently sold Bitcoin (BTC) after converting its GBTC to an ETF.

Additionally, the discount between GBTC shares and the underlying net asset value of the BTC they held narrowed to 0%. This is important for investors. Additionally, it signifies the value per share that will be distributed to investors in the event of the fund selling off its assets. However, it also takes into account settling all liabilities.

However, the narrowing net asset value data came in after the US SEC approved Grayscale’s ETF.

Read more: Who Is Sam Bankman-Fried (SBF), the Infamous FTX Co-Founder?

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Ciaran Lyons
Ciaran is a cryptocurrency journalist based in Sydney, Australia. He particularly enjoys writing about CBDC developments and the practical implementations of cryptocurrency in real-world scenarios. He has also appeared across major television networks in Australia including Channel Ten, Channel Nine and SBS TV. Prior to his foray into cryptocurrency, Ciaran worked as a presenter on national radio station Triple J.