The flagship cryptocurrency, Bitcoin, recently dropped below $40,000. This continues the crypto token’s decline, which began around the time the Spot Bitcoin ETFs were approved. Interestingly, a recent development indicates that the defunct crypto exchange FTX has greatly contributed to this price dump.
Why Bitcoin Dropped Below $40,000
According to a Bloomberg report, FTX sold off a majority of its shares in Grayecale’s Bitcoin Trust (GBTC) after the Bitcoin ETF conversion. This means that it has partly contributed to Grayscale’s unending BTC sales in a bid to fulfill these redemptions. Grayscale’s move in the market is believed to be the reason why Bitcoin’s price has continued to plummet.
NewsBTC had previously reported how GBTC experienced outflows of over $2 billion in just five days after it began trading as a Spot Bitcoin ETF. Now, this trend looks to have been spearheaded by FTX as a sale of all their GBTC holdings amounts to almost $1 billion, according to recent reports.
Just like every other GBTC investor, FTX is believed to have been taking profits, considering that the fund was trading at a discount from BTC right until the Bitcoin ETF conversion. Moreover, FTX would have liquidated its GBTC holdings sooner rather than later, considering that it is in the process of repaying all its customers.
FTX’s sister company, Alameda Research has also been busy in the market as of late, possibly in a bid to also contribute to FTX’s repayment plan. NewsBTC had reported that the trading firm moved significant portions of its crypto holdings to Binance, suggesting that an imminent sell-off was on the horizon.
Things Could Still Get Worse
Bloomberg analyst James Seyffart recently revealed that the outflows from Grayscale’s GBTC don’t look to be slowing down. GBTC is said to have recorded over $640 million in outflows on January 22. This figure represents its largest outflow in a single day, with a total of $3.45 billion out of the fund so far.
If this trend continues, it could further have a negative impact on BTC’s price as Grayscale will have no choice but to keep offloading its BTC holdings on the market. Since GBTC started trading as a Spot Bitcoin ETF, the asset manager has deposited over 63,900 BTC into Coinbase and has likely dumped all these tokens on the market already.
Grayscale still has over $21 billion assets under management (AuM) and a BTC holding of over 573,000, meaning a selling pressure of such magnitude could be really disastrous for Bitcoin and the broader crypto market.
At the time of writing, Bitcoin was trading at around $39,700, down over 3% in the last 24 hours, according to data from CoinMarketCap.
