Bitcoin fell below $40,000, and FTX sold off its Grayscale GBTC. When will the market rebound again?

Author: Jordan, PANews

At the beginning of the new year of 2024, the cryptocurrency market is facing another test.

In the early morning of January 23, the price of Bitcoin fell below the key support level of US$40,000 for the first time since December last year. Although it rebounded slightly after briefly touching a low of US$39,507.94, it has not yet achieved a second breakthrough. Obviously, the encryption market did not usher in a "big bull" as previously predicted after the spot Bitcoin ETF was approved. On the contrary, it was invaded by a strong sense of selling pressure. What exactly caused this decline in the market.

Grayscale selling caused the Bitcoin market to fall into "pessimism" . Is FTX the culprit?

Spot Bitcoin ETFs, including Grayscale GBTC, were approved for listing and trading on January 11. This news once pushed the price of Bitcoin to soar to $49,000. However, this growth did not last long, as A large amount of funds flowed out of GBTC, and the market encountered obvious selling pressure.

Grayscale GBTC has been established for 10 years. Its previous structure was a closed-end fund (which was not very attractive to investors). In fact, by the time the US Securities and Exchange Commission approved the spot Bitcoin ETF, the asset size of GBTC had Nearly US$30 billion, so when GBTC transformed into a more liquid spot ETF in the early days, "stock" holders unsurprisingly chose to sell——

• After Grayscale GBTC started trading on January 11, a total of 31,638 BTC (approximately US$1.366 billion) was transferred to Coinbase Prime for three consecutive trading days in the US stock market. .

  

• On January 16, Grayscale transferred 9,000 BTC to Coinbase Prime, worth approximately US$380 million.

  

• On January 17, Grayscale transferred 18,638 BTC to Coinbase Prime, worth approximately US$798 million.

  

• On January 18, Grayscale transferred 9,840 BTC to Coinbase Prime, worth approximately US$418 million.

  

• On January 19, Grayscale transferred 12,865 BTC to Coinbase Prime, worth approximately US$529 million.

  

• On the evening of January 22, the address labeled Grayscale: Bitcoin Trust transferred a total of 14,356 BTC to Coinbase, worth approximately $585 million, and an additional 3,950 BTC (worth approximately $160 million) was distributed to four Address, expected to be transferred to Coinbase soon (mining fees from Coinbase Prime address have been received).

However, during the outflow of GBTC funds, one institution attracted the attention of the crypto community, and it was FTX. On the evening of January 22, two people familiar with the matter revealed that the bankrupt cryptocurrency exchange FTX sold off 22 million GBTC shares it held. A large part of it was a capital outflow worth up to US$1 billion. So far, FTX’s GBTC Ownership has been reset to zero.

According to a filing published by FTX on November 3, 2023, FTX holds shares of five Grayscale trust funds in the ED&F Man Capital Markets (now known as Marex Capital Markets Inc.) brokerage account, and another in Bitwise management Nearly 3 million shares are held in a statutory trust. Like many large cryptocurrency trading entities, FTX profited from the spread between the price of Grayscale Trust shares and the underlying Bitcoin net asset value in the fund. At the end of October 2023, FTX’s GBTC shares were only worth approximately 5.97 On the first day of trading on NYSE Arca, the closing price of the Grayscale Bitcoin ETF reached $40.69, which meant that the value of GBTC shares held by FTX had risen to about $900 million at that time.

Coincidentally, just an hour before FTX sold off its GBTC holdings, its subsidiary Alameda Research suddenly announced the withdrawal of the lawsuit against Grayscale. It is reported that Alameda Research had accused Grayscale of "seeking profits at the expense of shareholder interests." According to Alameda last March The lawsuit, filed in a Delaware court, claims Grayscale charges excessive fees and refuses to let investors redeem shares from two of its crypto trusts: GBTC and Grayscale Ethereum Trust. Considering that FTX and its associated debtors reached a global settlement with the joint official liquidator at the end of last year, and that it chose to withdraw the lawsuit, it seems to be related to its "cash-out" of selling GBTC holdings of Bitcoin ETF. However, as of now, Grayscale, FTX , and Galaxy Digital, a cryptocurrency trader that assisted in the sale of FTX’s bankrupt assets, did not respond to requests for comment.

bottom? Rebalance? Bounce?

Just before the GBTC sell-off, Arthur Hayes, co-founder of BitMEX, posted on the Enter a put option expiring on March 29 with an exercise price of $35,000. Arthur Hayes also speculated that Bitcoin’s downward trend may indicate future problems with U.S. dollar liquidity, and this trend may continue until the U.S. Treasury Department’s quarterly refinancing announcement on January 31.

Arthur Hayes's "bottom theory" is not unreasonable. At first glance, spot Bitcoin ETF products will bring a large amount of new funds to the cryptocurrency market, such as BlackRock (IBIT) and Fidelity (FBTC) two companies starting trading Assets under management (AUM) exceeded $1 billion in just one week. However, as investors took profits or moved to other lower-cost instruments, the addition of GBTC caused billions of dollars in outflows, and funds also returned to existing spot Bitcoin exchange-traded products and ProShares (BITO) in Europe and Canada. When futures ETFs exit, the spot cryptocurrency market does not receive incremental funds as expected, so this must be balanced.

From this perspective, as FTX has completed the sell-off of GBTC holdings, the overall market selling pressure may be relieved. After all, the liquidation of bankruptcy estate holdings is a relatively unique event.

On the other hand, except for Grayscale’s “selling” during this period, other spot Bitcoin ETFs are actively “buying”. According to CC15Capital summary data, as of January 19, spot Bitcoin ETFs had a net purchase of 27,717 BTC.

Of course, in the short term, GBTC may face continued sell-side pressure in the new week as it reduces its assets under management, but as the ETF market gradually stabilizes, other ETF players may absorb GBTC's outflows. This view is consistent with assisting This coincides with Michael Novogratz, CEO of Galaxy Digital, the cryptocurrency trader who sold FTX’s bankrupt assets. On January 21, Michael Novogratz posted on social media that although investors will sell GBTC, most people will switch to other ETFs, so they are not worried about the current fluctuations. He predicted that the market's "indigestion" state will be within six months. The month ends and BTC will reach new highs.

Although there are different views on the crypto trend at this stage, one thing is undeniable, that is, the industry as a whole is in a new bull market cycle. With Bitcoin’s fifth “halving” coming soon, the subsequent development of the market situation Worth paying attention to.