s Genesis Financial seeks to repay creditors through its bankruptcy proceedings, the court granted the firm approval to liquidate around $1.3 billion worth of shares in the Grayscale Bitcoin Trust (GBTC). This comes after GBTC experienced significant outflows exceeding $5 billion following its conversion to a Bitcoin spot ETF earlier this year. Some within the industry worry this additional sell-off could put more downward pressure on Bitcoin's price.
Coinbase's Perspective on Market Impact
In its weekly market report, Coinbase argues that while it remains unclear if the funds from Genesis' GBTC sales will flow into other Bitcoin ETFs or directly into bitcoin itself, the exchange believes most of the money will likely stay within the crypto ecosystem. This is due to rules allowing Genesis to either directly convert the GBTC shares into bitcoin to repay creditors, or sell the shares and distribute cash which would then flow back into crypto purchases. As such, Coinbase forecasts a net neutral impact on the overall market.
Historical Context for Crypto Market Flows
The report also places the GBTC outflows in historical context by noting the strong inflows seen into Bitcoin ETFs in their first month compared to traditional financial products. For example, net flows into Bitcoin ETFs in their first 30 days topped those of the SPDR Gold Shares ETF when it launched. However, some uncertainty remains around how many Genesis creditors will ultimately liquidate any received bitcoin.
Expert Insights on Market Impact
Other industry figures shared varied takes. Swan Bitcoin analyst Sam Callaghan acknowledged there would be "netting" in crypto markets due to the sell-off, but uncertainty in creditor actions. Meanwhile, Bitfinex chief Jag Kooner saw the steep discount on GBTC shares as driving recent high volume selling in recent weeks. Overall, opinions diverge on how creditor distributions and subsequent flows may influence Bitcoin prices in the short-term.
