Bitcoin, news from Genesis: it will be able to sell $1.3 billion in GBTC

Not particularly good news for Bitcoin coming from Genesis.

In fact, the bankruptcy court has authorized Genesis Global Holdco LLC to sell approximately 35 million shares of Grayscale Bitcoin Trust (GBTC) for a total value of over 1.3 billion dollars.

The cryptocurrency lender, who went bankrupt after the failure of FTX, is preparing to compensate its creditors, including former clients who lent digital assets, and to do so, it is liquidating all liquidable assets to cash in dollars.

Bitcoin news: Genesis sale

Bloomberg reports that Judge Sean Lane has stated his intention to grant Genesis’ request to sell GBTC shares, and also reports that the sale will be conducted over time with the assistance of a broker.

In addition to the 35 million GBTC shares, GBTC will also sell over 11 million shares of the Grayscale Ethereum Trust for an additional value of over 200 million dollars. 

As of today, there are still 517 million GBTC shares in circulation, so the sale of Genesis represents less than 7%. 

Since becoming an ETF on January 11th of this year, GBTC has already liquidated over 25% of the BTC it held as collateral for its shares. 

This means that in just over a month, the Grayscale Bitcoin Trust has returned three and a half times the number of shares that Genesis is expected to return. 

In fact, a portion of the GBTC shares sold on the markets in the last month have ended up being withdrawn from the market by the Grayscale Bitcoin Trust, and it is likely that the 35 million Genesis shares will also have to be withdrawn from the market. 

Since for every GBTC action there are less than 0.9 thousandths of Bitcoin as collateral, if the 35 million Genesis shares were actually withdrawn from the market, it would mean that the Grayscale Bitcoin Trust should liquidate another 31,000 BTC. Until today, in just over a month, it has liquidated almost 160,000.

The impact on the price of Bitcoin

These numbers suggest that the impact on the price of Bitcoin from such a sale may not be particularly significant. 

It should be noted that in the second half of January, the Grayscale Bitcoin Trust sold over 10,000 BTC on average per day for about ten consecutive days, for a total exceeding 100,000 Bitcoin. 

Those that the fund might be forced to sell if it were required to withdraw from the market all 35 million shares of Genesis are less than a third, and they are unlikely to be liquidated all at once, since the sale of Genesis will be conducted over time. 

During those ten days in which Grayscale was liquidating an average of more than 10,000 BTC per day, the price of Bitcoin first dropped below $39,000, but then it rose well above $40,000. 

Ignoring the mini-bubble of the day of the market landing on the new ETFs, which briefly brought the price of Bitcoin to $49,000, the previous price was about $44,000, while after the end of the large GBTC sales it had risen to $43,000. In the following days, it then rose to $48,000 and then to $52,000. 

This leads to imagine that, if Genesis sales will actually be diluted over time, they could have a minimal impact on the price of Bitcoin, and such impact could also be only temporary. 

In fact, yesterday when the news came out, the markets practically ignored it, since just yesterday the price rose from less than $50,000 to over $52,000. 

The role of other ETFs

The other ETFs are pushing the price of Bitcoin these days. 

While the Grayscale Bitcoin Trust was liquidating almost 160,000 BTC, BlackRock’s ETF (IBIT) purchased over 105,000, and Fidelity’s ETF nearly 80,000. Therefore, these two ETFs alone have already bought and withdrawn more BTC from the market than GBTC has liquidated. 

These are then added at least two new Bitcoin ETFs, ARKB by Ark and BITB by Bitwise, which respectively have purchased almost 23,000 and almost 19,000 BTC. 

So considering only these five new ETFs, while GBTC was liquidating about 160,000 BTC, the other four were withdrawing over 220,000 from the markets. 

It is clear that this dynamic may have contributed significantly to the rise in the price of Bitcoin, as in the first half of February alone it went from $43,000 to $52,000.