Coinbase Predicts Genesis' GBTC Share Liquidation Won't Disrupt Crypto Market
Summary:
Coinbase projects that the sale of Grayscale Bitcoin Trust shares by the bankrupt crypto lending firm, Genesis, will not disrupt the crypto market, claiming that most funds will remain within the crypto ecosystem. Despite concerns about potential downward pressure on Bitcoin (BTC), Coinbase maintains that the effects will be neutral. This prediction comes amid a recent court approval for Genesis to liquidate about $1.3 billion worth of GBTC to repay its creditors. Final approval for the plan is scheduled for February 26.
Coinbase, a renowned cryptocurrency exchange, asserts that the decision of the now-insolvent Genesis crypto lending firm to sell its Grayscale Bitcoin Trust (GBTC) shares will likely not cause turmoil in the cryptocurrency market. Coinbase projects that the majority of the funds will be reinvested into the crypto ecosystem, suggesting a benign effect on the market overall. The bankruptcy court granted Genesis the go-ahead on Feb. 14 to dispose of approximately $1.3 billion of GBTC in a bid to repay its creditors.
This move came on the heels of Grayscale Investments being given the green light to transition GBTC into a Bitcoin exchange-traded fund (ETF) in its raw form on Jan. 10, which resulted in GBTC outflows ballooning to over $5 billion. Adding to the industry’s worry is the belief that Genesis' decision to sell GBTC could trigger extra downward pressure on Bitcoin (BTC).
In its weekly report, Coinbase speculated that while the destination of the extra GBTC outflows - whether alternative Bitcoin ETFs or directly into Bitcoin - to compensate creditors remains unclear, it is likely the funds will persist in the cryptocurrency ecosystem.
Coinbase further stated that “under the terms of the bankruptcy plan, Genesis may either convert the GBTC shares into the base Bitcoin asset on behalf of the creditors or outright sell the shares and distribute the proceeds”. The bankruptcy plan will go before the court for approval on February 26.
Furthermore, as per Coinbase's statement, Genesis has 35.9 billion GBTC shares, along with 8.7 million Grayscale Ethereum Trust (ETHE) and 3 million Grayscale Ethereum Classic Trust (ETCG). The exchange also underscored that the inflow into Bitcoin ETFs in the first month exceeded that of State Street's SPDR Gold Shares ETF(GLD).
Meanwhile, Sam Callahan, a senior analyst at Swan Bitcoin, shared his viewpoint on the social media platform, X (formerly Twitter), about the upcoming "netting" in the crypto market due to Genesis' GBTC sales. However, he conceded that the exact figure of creditors ready to sell their Bitcoin holdings remains unknown.
Bitfinex's head of derivatives, Jag Kooner, speaking to Cointelegraph, highlighted that the primary incentive for the high volume of share selling in recent weeks is the substantial 'discount' GBTC investors claim to enjoy.
Published At
2/18/2024 8:48:37 AM
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