Another massive selling event of Grayscale Bitcoin Trust (GBTC) is looming after the latest updates on the case involving Genesis Global and Gemini Trust. With 31.2 million shares at stake worth over $1.3 billion, how will this potentially impact the market?
A Win for Genesis
According to the Wall Street Journal, crypto lender Genesis just won the judge’s favor in its conflict against Gemini regarding the ownership of 31.2 million shares of GBTC, which should help some of its creditors reclaim some of their funds. However, the finality of the matter is still subject to the resolution of some pending motions.
Genesis filed for bankruptcy in January last year after it took a major hit from the collapse of Three Arrows Capital and FTX in November 2022. Following this, the Winklevoss-owned firm, Gemini, sued its former partner. The point of contention lay over the GBTC ownership, claiming that the contested shares were pledged as collateral on loans to Genesis from customers under Gemini’s Earn investment program.
GBTC was subsequently converted into an exchange-traded fund (ETF) with the US Securities and Exchange Commission’s (SEC) approval last month. Based on Friday’s closing at NYSE Arca, the stake has more than doubled its value to $1.3 billion since Genesis’ bankruptcy filing as GBTC traded at $42.48 per share.
Effects of the Huge Selling Event to Bitcoin and the Crypto Market
According to Blockworks, the eventual granting of control over its GBTC shares would also enable Genesis to offload its Ethereum Trust (ETHE) and Ethereum Classic Trust (ETCG) both issued by Grayscale. Again, it could result in a gush of outflows in billions of dollars, which many fear may drag down Bitcoin and the prices of other cryptocurrencies, similar to the affair that took place in the aftermath of the SEC’s nod.
Should the outflows begin soon, the selling pressure could hypothetically offset the gains of Bitcoin over the weekend, which saw it soar between $45K on Friday and $48K this Sunday. However, K33 Research Senior Analyst Vetle Lunde believes it won’t disturb the market based on his statement to DLNews.
Lunde clarified that the judge’s verdict only allows GBTC to be returned to customers in cash and not in Bitcoin while adding, “But per the motion, the aim is to use proceeds from sales [or] redemptions, or cash on hand in anticipation of proceeds, to purchase Bitcoin.”
“The net effect should be balanced net buying and selling,” the analyst went on. This means the next dump of GBTC will hardly be felt at all.
What’s more, the growing inflows in spot Bitcoin ETFs will likely quell the weight of the sell-out. But then again, he warned, “Even if approved, less transparent spot purchases compared to daily ETF flow updates may suffice to spook the market into de-risk mode.”
Bitcoin saw a climb in prices going to the weekend as it breached $45K on Friday to today’s $48,300 as of 7:30 AM (UTC). The pump resulted in more than 2% increase in the price of the coin to take its market cap up to $948 billion.