Bankrupt cryptocurrency lender Genesis completed the sale of its Grayscale Bitcoin Trust (GBTC) shares on April 2 and used the proceeds to purchase 32,041 bitcoins (valued at $2.1 billion), according to court documents filed Friday.
On February 15, Genesis received permission from the New York Bankruptcy Court to sell nearly 36 million GBTC shares, as well as additional shares in two Grayscale Ethereum Trusts. At the time of the filing, estate lawyers valued Grayscale shares at a total of $1.6 billion, including nearly $1.4 billion in GBTC, $165 million in the Grayscale Ethereum Trust, and $38 million in the Grayscale Ethereum Classic Trust.
But at the current Bitcoin price, the GBTC held by Genesis alone is worth nearly $2.2 billion.
After the U.S. SEC approved Grayscale's Bitcoin spot ETF product GBTC earlier this year, Gensis began redeeming its GBTC shares to raise funds to compensate users.
It is worth noting that Gensis's sell-off was conducted through Coinbase. Coinbase previously assured the community that these sell-offs are not expected to have a broader impact on the cryptocurrency market. Coinbase stated: "Our view is that most of these funds are likely to remain in the crypto ecosystem, resulting in a neutral overall impact on the market."
It explains that the rules of the Gensis bankruptcy plan allow Genesis to convert GBTC shares into the underlying Bitcoin asset on behalf of creditors, or to sell the shares outright and distribute cash.
In fact, as early as March, Bloomberg ETF senior analyst Eric Balchunas said that the significant outflow of Grayscale GBTC funds was likely due to Genesis. Genesis seems to be selling its GBTC shares to buy Bitcoin at a low price.
At present, Gensis's selling has ended. This means that the maximum selling pressure of GBTC has ended. According to Farside Investors' monitoring, since the launch of the Bitcoin spot ETF, GBTC has accumulated a net outflow of up to 15.5053 billion US dollars, which has also caused the overall outflow of Bitcoin spot ETF to be greater than the inflow. However, this trend quickly changed after Gensis stopped selling. Bitcoin ETF has now had net inflows for 4 consecutive days. This trend started when Genesis ended its selling, especially yesterday, the net inflow of Bitcoin ETF exceeded 200 million US dollars, equivalent to 3,000 Bitcoins, which is 3.3 times the current new supply of Bitcoin. Although Bitcoin will be halved in about 12 days, the demand for Bitcoin by institutions is equivalent to doubling.
Is Bitcoin halving really coming?
According to current estimates, Bitcoin will experience its fourth block reward halving in about 12 days, from the current 6.25 BTC to 3.125 BTC. According to past history, Bitcoin will experience a halving trend, that is, a sharp rise, when it enters the halving period. But this time the situation is somewhat different from the past.
In previous halving events, Bitcoin usually set a new historical high within a few months after the halving, but this time it occurred before the halving, and Bitcoin set a new historical high set in 2021 on March 5.
However, analysts at Coinbase said the market may be placing too much emphasis on price action around the halving without taking into account broader market conditions. "Bitcoin's performance around previous halving events is likely to depend on the specific circumstances. This may explain why price trends vary so much across cycles."
For example, they attribute Bitcoin’s 45% growth ahead of its second halving in July 2016 in part to Brexit uncertainty, and attribute its 73% surge ahead of its third halving in May 2020 to the pandemic-era IEO boom.
In short, Bitcoin’s performance during the halving period is still affected by the background at the time.
This time, Bitcoin hit a new historical high before the halving, and the driving force behind it was the Bitcoin spot ETF.
The approval of the Bitcoin spot ETF this year is the main reason for the sharp rise in Bitcoin, which has fundamentally changed the fundamentals of Bitcoin. This is a major positive factor that has never been seen in previous halvings.
Additionally, the amount of Bitcoin available for transactions (i.e., the difference between circulating supply and illiquid supply) has been declining since the beginning of 2020, a significant shift from previous cycles.
Typically, illiquid supply is caused by lost wallets and forgotten keys, but Coinbase analysts also mentioned that “the level of available Bitcoin supply has been trending downward over the past four years,” which is different from previous halving cycles.
But this is not necessarily a bad thing for Bitcoin, as it could mean that investors have long-term positions and are less willing to sell Bitcoin in the event of short-term price changes.
Fed uncertainty
Another key factor to consider with the upcoming halving event is the contrast between Bitcoin’s predictable, declining issuance rate and the uncertainty surrounding the Federal Reserve’s lowering of its benchmark interest rate.
The general view is that if the Fed cuts rates, Treasury yields will weaken, making riskier assets such as cryptocurrencies more attractive to investors. However, unexpectedly strong economic data in the past few weeks has sparked debate around rate cuts, and expectations of a Fed rate cut have been significantly reduced, which is also considered the main reason for the weakness of the crypto market in the past week. But with the upcoming Bitcoin halving and the re-emergence of net inflows in Bitcoin ETFs, the crypto market may usher in huge changes.
