The crypto community has been abuzz with discussions over Genesis' intention to sell approximately 36 million shares of Grayscale bitcoin Trust (GBTC), a move valued at around $1.5 billion. This announcement stoked fears of a possible market slowdown, reminiscent of the apprehensions that followed the sale of GBTC worth more than $1 billion by the bankruptcy estate of FTX. However, a deeper dive into the situation and subsequent clarifications reveal a less terrible scenario than initially perceived.
No, there will not be a drop similar to that of FTX
Genesis' decision to sell a significant portion of GBTC shares is based on its recent financial challenges and legal entanglements. Swan senior analyst Sam Callahan initially highlighted concern on This statement underlined the looming specter of GBTC outflows impacting the broader bitcoin market.
The GBTC in question comes primarily from two sources: Genesis' unsecured loan to Three Arrows Capital (3AC), which resulted in the acquisition of 4.7 million GBTC shares, and 30.9 million GBTC shares used as guarantee for the Gemini Earn program. The latter's involvement led to regulatory scrutiny and a subsequent $21 million settlement with the SEC by Genesis.
Adding to the complexity, an additional 31 million GBTC shares valued at $1.3 billion were allocated to Gemini lenders, making a total of nearly 67.1 million shares worth close to $3 billion ready. for sale. This major liquidation plan fueled fears of a negative impact on bitcoin's market value due to increased GBTC outflows.
The prospect of this liquidation raised alarm bells about possible exits from GBTC and its impact on the market value of bitcoin. However, Greg Schvey, CEO of Axoni, provided a critical perspective that changes the narrative. Schvey emphasized the mitigating factor for reimbursements in kind, indicating:
The proposed Chapter 11 settlement requires Genesis to pay creditors in kind (i.e., bitcoin lenders receive bitcoins in exchange, rather than US dollars). Much of the GBTC selling pressure will be absorbed by Genesis Estate's spot purchase of btc.
bitcoin in-kind exchanges are key
This in-kind payment mechanism is crucial to understanding why fears of a market slowdown may be overblown. As Callahan later acknowledged, learning from Schvey, the key issue is the percentage of creditors who will choose to sell their btc upon receipt.
Schvey's insights highlight that the in-kind distribution was a strategic decision to prevent long-term btc holders from being forced to recognize profits. “In particular, in-kind distribution was a priority negotiation topic to prevent long-term btc holders from recognizing profits upon receiving USD back,” he stated, suggesting the belief that a substantial volume of lenders may not immediately sell. the bitcoin received.
This detailed context dispels the initial fear around Genesis' GBTC sale. It highlights a concerted effort to mitigate adverse effects through in-kind reimbursements, a measure that could stabilize market reactions.
At the time of this publication, btc was trading at $49,761.
Featured image created with DALL·E, chart from TradingView.com
