The estate associated with the failed crypto exchange FTX and hedge fund Alameda Research reportedly sold over two-thirds of its Grayscale Bitcoin Trust (GBTC) shares recently.
The sale, which occurred at the onset of spot exchange-traded fund (ETF) trading for GBTC, is estimated to have generated at least $600 million in proceeds.
This move by FTX and Alameda Research marks a significant shift in their cryptocurrency holdings and comes amidst ongoing legal battles and concerns surrounding GBTC fees and shareholder redemptions.
FTX estate’s GBTC holdings and sale
According to a report published on January 22nd by Bloomberg, sources familiar with the matter have disclosed that the FTX estate held a substantial 22.28 million GBTC shares, valued at $902 million, before the conversion of GBTC into a spot ETF on January 11th.
However, within the first three days of trading following the conversion, FTX sold “more than two-thirds” of its GBTC shares, indicating that it now holds less than 8 million shares, valued at $281 million.
The sale of GBTC shares by FTX and Alameda Research is not isolated from a larger context of legal disputes and shareholder concerns surrounding Grayscale’s Bitcoin Trust. Earlier in March, Alameda Research initiated legal proceedings against Grayscale, alleging that the company imposed exorbitant fees.
As part of the lawsuit, Alameda Research accused Grayscale of implementing a “self-imposed redemption ban,” effectively preventing shareholders from redeeming the Bitcoin held by the trust.
Before converting GBTC into an ETF, most investors had limited means to redeem their shares for the trust’s underlying Bitcoin. As of June 15th, the share price of GBTC was reported to be 44% below the actual value of the Bitcoin it represented.
FTX’s substantial sale impact on GBTC
FTX’s recent sale of approximately 22 million GBTC shares, valued at nearly $1 billion, following the conversion into an ETF, has substantially reduced the fund’s ownership of GBTC to zero.
Additionally, GBTC has experienced outflows exceeding $2 billion since its transformation into an ETF.
A spokesperson from Grayscale acknowledged these developments, stating, “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.”
Grayscale’s landmark ETF approval
The transformation of Grayscale’s Bitcoin Trust into an ETF marked a significant milestone for the cryptocurrency industry. This move gained approval from the US Securities and Exchange Commission (SEC), allowing Grayscale to create the world’s largest Bitcoin ETF with assets totaling over $28.6 billion under management.
The SEC approved 11 spot Bitcoin ETFs, including offerings from industry giants like BlackRock’s iShares Bitcoin Trust, Grayscale Bitcoin Trust, and ARK 21Shares Bitcoin ETF.
The road to legitimacy
The approval of these ETFs signifies a landmark moment that has further bolstered the legitimacy of the cryptocurrency industry and catapulted Bitcoin into the mainstream.
After a decade-long tussle between the SEC and the digital asset industry, this development is a crucial step toward integrating cryptocurrency into traditional financial markets.
