FTX’s Collapse Plunges Grayscale’s Bitcoin Trust Into Chaos

Table of Contents

• FTX’s $1 billion selloff
• Impact on GBTC and Bitcoin prices
• Lingering industry doubts
• Looking ahead

The dramatic fall of cryptocurrency exchange FTX is having major ripple effects across the digital asset industry, with Grayscale’s Bitcoin Trust (GBTC) plunging into chaos as FTX liquidated its multi-billion dollar stake in the fund.

FTX’s $1 billion selloff

As FTX struggled to raise emergency funding amid a liquidity crisis last month, the company was forced to sell its entire $1 billion position in GBTC, consisting of 22.3 million shares [ CoinDesk]. The selloff amounted to around 40% of GBTC’s $2.5 billion in total outflows since the fund converted into a spot Bitcoin ETF earlier this year [ FTX Bankruptcy Proceedings]

Impact on GBTC and Bitcoin prices

FTX’s massive sale sent GBTC’s share price and premium plunging, reducing the fund’s assets under management and applying downward pressure on the Bitcoin price. The events have cast doubt on expectations that Bitcoin ETFs would attract new capital and boost Bitcoin. [ @FTX_Official, $GBTC]

Alameda Research, FTX’s trading affiliate, also dropped its lawsuit against GBTC [ Reuters] after unwinding its position, demonstrating the dramatic fallout from FTX’s collapse.

Lingering industry doubts

With FTX’s position selling off in a distressed fire sale, many in the industry now question whether traditional institutional investors will provide the inflows needed to support Bitcoin ETFs over the long term. [ @BTC]

Looking ahead

As Bitcoin struggles to break above $17,000 following a brutal November, the FTX fallout serves as a potent reminder of crypto’s potential for volatility and contagion. How Bitcoin funds, exchanges and other companies navigate these choppy waters will determine the crypto sector’s resilience in the months ahead.

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