Investors have sold over $2 billion in shares of Grayscale Bitcoin Trust (GBTC) since its conversion to an exchange-traded fund (ETF).
Concurrently, FTX’s bankruptcy estate completed a large sale of 22 million shares, accounting for a significant portion of the $2 billion in sales.
GBTC has nearly $30 billion in assets after a decade of operations. However, its conversion to an ETF marked a watershed moment, resulting in increased competition from newly launched funds by financial behemoths such as BlackRock and Fidelity.
Unlike its competitors, GBTC saw a significant withdrawal of investments, which many attributed to the trust’s relatively high fees.
FTX exchange liquidated all of its GBTC shares, which totaled around $1 billion. This strategic move coincided with a drop in Bitcoin’s price, which contradicted the expected positive impact of Bitcoin ETFs on its valuation.
Following its conversion to an ETF, GBTC faced several challenges, including increased competition and a significant drop in investor confidence.
The high fees associated with GBTC contributed to the sell-off as investors sought alternative options provided by newer funds.
FTX, which is known for profiting from the spread between Grayscale trust shares and actual Bitcoin value, saw the value of its GBTC holdings decline significantly.
At its peak, the value was around $900 million. FTX’s diverse portfolio included shares in several Grayscale trusts as well as a Bitwise trust managed by ED&F Man Capital Markets (now Marex Capital Markets).
Alameda Research, which is affiliated with FTX, recently dropped a lawsuit against Grayscale, citing concerns about high fees.
This development coincided with Grayscale’s ETF’s entry into the market as well as FTX’s decision to divest its GBTC shares.