The analyst at Coinbase, a US cryptocurrency exchange, believes that the sale of shares in the Grayscale Bitcoin Trust (GBTC) by the bankrupt cryptocurrency lending company, Genesis, will not disrupt the cryptocurrency market. The majority of the funds will flow back into the cryptocurrency ecosystem, therefore the impact on the market will be neutral.
Last week, the Southern District of New York approved Genesis’ sale of 35 million GBTC shares, worth over $1.3 billion. The company stated that the process will be gradually completed with the help of brokers. Genesis also holds 8.7 million shares of the Grayscale Ethereum Trust (ETHE) and 2.9 million shares of the Grayscale Ethereum Classic Trust (ETCG), which will also be sold to repay creditors.
After Grayscale was authorized to convert GBTC into a Bitcoin spot ETF earlier this year, over $5 billion has flowed out of GBTC. Industry experts were concerned that Genesis’ approval to sell GBTC shares might lead to another downward pressure on the price of Bitcoin.
In its weekly commentary, Coinbase pointed out that it is still unclear how much of the additional GBTC outflow will be used directly to purchase Bitcoin to repay creditors, or how much will flow into other US Bitcoin spot ETFs. However, the company believes that these funds will stay within the cryptocurrency ecosystem.
The Coinbase analyst stated that the provisions of Genesis’ bankruptcy plan allow the company to convert GBTC shares into Bitcoin assets on behalf of the creditors, or to sell the shares directly and distribute cash. The confirmation hearing for the bankruptcy plan is scheduled for February 26.
Sam Callaghan, a senior analyst at Bitcoin financial services company Swan Bitcoin, stated on the X platform last week that when Genesis sells these GBTC shares and purchases Bitcoin spot to repay creditors, there will be a certain level of netting in the market. However, Callaghan also pointed out that the number of creditors selling their Bitcoin holdings is still uncertain.
Coinbase also emphasized in its report that the net inflow of all Bitcoin spot ETFs in the past 30 days ($3.3 billion) has exceeded the net inflow in the first month of the gold ETF (SPDR Gold Shares) issued by State Street ($1.85 billion).
Coinbase stated that the momentum brought by the significant net inflow of spot ETFs has helped the total market value of cryptocurrencies recover to $2 trillion. The analyst believes that as more institutional participants adapt to the new reality of ETFs and with the current global narrative of currency reflation, Bitcoin (and cryptocurrencies in general) should maintain strong support in the next 3 to 6 months.
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