Alameda Research, Affiliated with FTX, Withdraws Lawsuit Against Grayscale; FTX's $1 Billion Sale of Grayscale's Bitcoin ETF Main Contributor to Outflow, Sources Say

Investors have offloaded over $2 billion of the Grayscale Bitcoin Trust (GBTC) since its recent conversion into an exchange-traded fund (ETF). A significant portion of this selling activity, accounting for approximately 22 million shares, can be attributed to FTX's bankruptcy estate, as per a recent CoinDesk report.

While traditional spot Bitcoin ETFs began trading on January 11, gaining approval from the U.S. Securities and Exchange Commission (SEC) after years of delays, the Grayscale fund had already been in existence for a decade. Originally structured as a less appealing closed-end fund, it had amassed nearly $30 billion in assets by the time the SEC approved its transition to an ETF, alongside the approval of 10 new Bitcoin ETFs.

Despite positive inflows into newly launched ETFs from entities like BlackRock and Fidelity, substantial sums of Bitcoin have been withdrawn from GBTC. The data indicates that FTX played a significant role in this outflow, selling 22 million shares, valued at nearly $1 billion, and reducing its GBTC ownership to zero.

With FTX completing the sale of its substantial holdings, the selling pressure may ease, as bankruptcy estate liquidations are relatively unique events. FTX had leveraged the price disparity between Grayscale trust shares and the net asset value of underlying Bitcoin. As of October 25, 2023, FTX held 22.3 million GBTC valued at $597 million, which rose to around $900 million on the first day of Grayscale's Bitcoin ETF trading on January 11.

FTX's holdings encompassed shares in multiple Grayscale trusts, held in a brokerage account at ED&F Man Capital Markets (now Marex Capital Markets Inc.), according to filings. Both Marex and Galaxy Digital, assisting in the asset sale for FTX's bankruptcy estate, declined to comment. Additionally, on Monday, Alameda Research, linked to FTX, voluntarily dismissed a lawsuit accusing Grayscale of excessive fees.

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