FTX Sold About $1B of Grayscale Spot Bitcoin ETF Shares: Report

FTX, the now-defunct crypto exchange, has reportedly offloaded nearly $1 billion of shares in Grayscale’s Bitcoin Trust (GBTC). According to CoinDesk, which cited “private data” and anonymous sources, FTX aimed to liquidate its holdings to aid in reimbursing its creditors, having disposed of all 22 million shares it held in the GBTC fund. 

The report indicates that the exchange took advantage of price disparities between Grayscale trust shares and the net asset value of underlying Bitcoin. The FTX estate may have generated approximately $600 million from the sale.

#FTX Shocks Market with $1B #Grayscale ETF Sell-Off & Alameda Drops Bombshell Lawsuit Against Grayscale! 🚨💥💰📉 $GBT

• 🚨 FTX's bankruptcy estate offloaded approximately $1 billion of Grayscale's Bitcoin ETF, shedding light on recent GBTC outflows.
• 📊 Since the conversion… pic.twitter.com/iipXsgXnef

— RichQuack (@RichQuack) January 22, 2024

Spot Bitcoin ETFs started trading on Jan. 11, following the long-awaited United States Securities and Exchange Commission (SEC) approval. However, Grayscale’s fund has been present for a decade as a less attractive closed-end fund. Following SEC approval, the fund transitioned into an ETF, accompanied by the approval of 10 newly created BTC ETFs.

According to a filing from Nov. 3, FTX held 22.3 million GBTC shares valued at $597 million as of Oct. 25 last year. At the time of writing, those same shares were worth about $900 million. 

Grayscale’s conversion of its BTC Trust into a spot ETF which now stands as the world’s largest Bitcoin ETF with assets exceeding $28.6 billion, marking a significant milestone in the crypto space.

Alameda Research’s Grievances Against Grayscale

Alameda Research – FTX’s sister trading firm – initiated a lawsuit against Grayscale last year to recover $250 million for FTX’s customers and creditors. This legal issue involves accusations of excessive fees and Grayscale’s alleged ban on redemption. Before Jan. 11, most investors couldn’t redeem their shares for the trust’s underlying BTC. As of June 15, the trust’s share price was 44% lower than BTC.

However, authorized participants were allowed to redeem on Jan.11 after the SEC approved the conversion of the Grayscale Trust into an ETF. As the approval date neared, the discount of GBTC shares to net asset value dropped to 1.55%, aligning the share price more closely with the value of the BTC they represented. Currently, GBTC is only 0.27% below its net asset value per share. The significant rise in value incentivized major GBTC holders like FTX to realize profits.

The crypto industry is experiencing a significant shift, with Bitcoin ETFs rapidly gaining popularity. In a six-day trading period, major players like BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s FBTC have collectively accumulated an impressive 95,000 BTC. Moreover, their assets under management are approaching the $4 billion mark.