BTC ETF selloffs push Bitcoin below the $40k mark
Bitcoin experienced a significant drop below the $40,000 mark as a result of sell-offs from FTX, a bankrupt cryptocurrency exchange, and BTC deposits on Coinbase by Grayscale, the issuer of the BTC ETF.
On January 22nd, Bitcoin (BTC) saw a decline of almost 9%, with its value falling to around $39,700 on platforms such as Binance and Coinbase. This drop in the price of the largest cryptocurrency is likely due to the outflows from Grayscale’s spot Bitcoin ETF, which is a fund based on the company’s well-established GBTC product.
GBTC is the biggest spot BTC ETF in the US market, with over $20 billion in assets under management. Since the Securities and Exchange Commission (SEC) allowed exchange-traded funds that track spot Bitcoin prices, the fund has experienced daily outflows of up to $500 million, resulting in over $2.8 billion leaving GBTC.
As these ETFs are backed by actual Bitcoins, Grayscale has sent BTC to exchanges for liquidation and redemption. According to crypto.news, Grayscale has deposited 52,227 BTC, worth around $2.2 billion, into Coinbase Prime accounts from its custodial wallets. The company also holds its GBTC Bitcoin with Coinbase.
A significant player exiting GBTC is FTX, the defunct crypto exchange, which was revealed on January 22nd. Under the administration of John J. Ray III, FTX’s estate has sold millions of GBTC shares for $1 billion.
In addition, Alameda Research, a crypto hedge fund affiliated with FTX, has voluntarily dropped its lawsuit against Grayscale and its parent company, Digital Currency Group. The lawsuit had alleged internal malpractice by the pair and aimed to unseal $9 billion on behalf of FTX debtors.
Meanwhile, the SEC has acknowledged Nasdaq’s request for spot BTC ETF options. These derivatives allow traders to speculate on the volatility of an asset or hedge against it, potentially attracting more capital into Bitcoin ETFs.
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