Bitcoin fell below $40,000 due to bankrupt cryptocurrency exchange FTX’s sale of GBTC and spot BTC ETF issuer Grayscale’s deposit of Coinbase BTC.
Bitcoin (BTC) fell nearly 9% on January 22, trading at around $39,700 on places like Binance and Coinbase. The price drop was likely driven by outflows from the Grayscale Spot Bitcoin ETF, a fund built on top of Grayscale’s long-standing GBTC product, the largest cryptocurrency.
GBTC is the largest spot BTC ETF in US marketing, with over $20 billion in assets under management. Since the Securities and Exchange Commission (SEC) allowed exchange-traded funds to track the spot price of Bitcoin, the funds have recorded daily outflows of up to $500 million, resulting in more than $2.8 billion being taken out of GBTC.
Because actual Bitcoin backs these ETFs, Grayscale sent the BTC to exchanges for liquidation and redemption. According to crypto.news, Grayscale deposited 52,227 BTC worth approximately $2.2 billion from custodial wallets into its Coinbase Prime account. The company’s GBTC Bitcoin is also stored at Coinbase.
As revealed on January 22, the main company leaving GBTC is the defunct cryptocurrency exchange FTX. FTX’s assets, led by bankruptcy trustee and CEO John J. Ray III, sold millions of dollars of GBTC stock for $1 billion.
Additionally, FTX-affiliated cryptocurrency hedge fund Alameda Research voluntarily dismissed a lawsuit against Grayscale and its parent company, Digital Current Group, alleging internal negligence on the part of both companies. The lawsuit aimed to release $9 billion on behalf of FTX debtors.
Elsewhere, the SEC acknowledged Nasdaq’s request for spot BTC ETF options. These types of derivatives allow traders to speculate on the volatility of an asset or hedge against it, a move that could attract more capital into the Bitcoin ETF.