Grayscale Continues Selling Bitcoin
It has been several days since one of the most anticipated news of the year, the approval of the first Bitcoin spot ETF, which in fact resulted in the approval of several ETFs news that was so eagerly awaited in the market, however, contrary to what many enthusiasts of the crypto ecosystem thought, the price went against after an intended price rise, liquidating billions of dollars in just one week. One of the villains in this new wave of selling is Grayscale, who has liquidated large positions; however, there is another seller who from the shadows has been making large sales and taking profits under the strategy of selling on the news, this is FTX.
How is it possible for FTX to liquidate shares of the Grayscale Bitcoin ETF (GBTC) if the ETF was only approved a few days ago?
The first thing we have to keep in mind is that Grayscale Bitcoin Trust (GBTC) is a company evidently managed by Grayscale, which has operated for many years, this company has been able to be the introduction to the financial world to Bitcoin without being properly an ETF, especially, when in 2020 it is declared as a "reporting company before the Securities and Exchange Commission (SEC)", which allowed the trust to be a gateway to institutional, for some years now, being as a kind of ETF without approval or recognition.
How is it different from an ETF?
Before being an ETF, Grayscale Bitcoin Trust (GBTC) was a very limited fund, without the legal backing that an ETF would have, so now many institutions can join by buying shares of the ETF, institutions and companies that previously could not freely access the financial instrument at the time of its creation, in addition, it should be thought that institutions felt insecure about this investment due to the lack of security in the legal framework by a new and innovative instrument, but at the same time the SEC looked at it with bad eyes.
As an ETF, large institutions can immediately be incorporated and have legal security from the SEC, leaving behind those limitations that existed from the beginning of the creation of the Grayscale Bitcoin Trust (GBTC).
Because Grayscale Bitcoin Trust (GBTC) had a very limited volume, the price of this trust or financial instrument normally did not coincide with the price of Bitcoin, when the price was down, Grayscale granted a significant discount to the reference price of Bitcoin, reaching a discount of up to 50% in some periods when the price of BTC was at its lowest point in the cycle.
To give an example, if an investor decided to place his money in (GBTC) in 2022, placing positions averaging 20K, GBTC's discount could place the price 50% lower, i.e. at 10K. This is a very favourable position in the present, as the news of the approval of the (GBTC) ETF was released and the positions could be liquidated with the news. This was the move by FTX, an old acquaintance in the crypto ecosystem.
FTX Asset Liquidation
As we know, FTX filed for bankruptcy, so it must go through a process of liquidation of assets, so it sees a golden opportunity to take advantage of the news that grants the approval of the ETF on the financial instrument that had invested years ago, taking significant profits on their positions, taking advantage of the discount of the positions reached 0 at the time of their sales, so they maximized their profits by selling their positions at the market price.
Some time ago there was news that Alameda Research had sued Grayscale for high fees for their services, remember that as in the ETF, this is a trust in which no operations are performed directly in Bitcoin, on the contrary, the safekeeping (in Coinbase) is the work of Grayscale, so it adds a fee for this service, of course, before their liquidations of their positions withdraws the claim on Grayscale, so Grayscale has had high fees for some time now.
FTX liquidates approximately USD 1 billion
Grayscale can continue to sell Bitcoin:
Although I have named FTX and its liquidation much of its shares in (GBTC), Grayscale is still a very important player in the price, because it has sufficient reserves to continue the selling spree, so we could say that FTX's move is only part of the problem. The sell-off, which as of this writing does not seem to be wearing off, is still being watched in the crypto ecosystem, as Bitcoin's influence has an impact on altcoins.
Grayscale is currently in a price war over ETF commission fees, perhaps this could be a factor among the observed movements, however, the company has not said anything about it.
Crisis or opportunity?
For many, seeing so many red candles may be a sign of alarm, but for those of us who have watched this market and believe in the future of the ecosystem, we see opportunities to accumulate in Bitcoin or Hive. The market behaves differently to the thinking of the masses in many cases, when everyone thought it was going to go up it went down, when everyone thinks Bitcoin is on its way to bottom, it will go up again, it is a repetitive thing of the market, so positioning for the long term is in many cases the most sensible option. of course, this is not an investment recommendation each person must research on their own and is completely responsible for their money.
This may be the last price correction before a major upward move on the weekly chart.
Of course, this is not an investment recommendation each person must research on their own and is completely responsible for their money.
Here are the sources:
What Is the Grayscale Bitcoin Trust?
Alameda Research drops suit against Grayscale as GBTC sees outflows
Thank you for your reading, until next time