Cryptocurrency exchange Coinbase believes that the approval for bankrupt crypto lending firm Genesis to sell its shares inGrayscale Bitcoin Trust (GBTC) won't disrupt the crypto market. It argued that most of the funds will flow back into the crypto ecosystem, resulting in a neutral impact on the market.
Genesis was granted approval by a bankruptcy judge on Feb. 14 to liquidate around $1.3 billion worth of GBTC as part of its efforts to reimburse creditors.
However, following the approval for Grayscale Investments to convert GBTC into a spot Bitcoin exchange-traded fund (ETF) on Jan. 10, GBTC has experienced outflows exceeding $5 billion. Additionally, there are concerns within the crypto industry that the recent approval for Genesis to also sell-off GBTC shares could lead to additional downward pressure on the price of Bitcoin
.Coinbase argued in its weekly report that while its unclear of where the additional GBTC outflows —whether towards other spot Bitcoin ETFs or directly into Bitcoin to reimburse creditors — is uncertain, it believes that the funds will likely remain within the crypto ecosystem.
“Our view is that much of these funds will likely remain within the crypto ecosystem, contributing to a neutral overall effect in the market.”
It explained that the rules of the bankruptcy plan allow Genesis to either convert shares of the GBTC into the underlying Bitcoin asset on behalf of the creditors, or sell the shares outright and distribute the cash. However, the confirmation hearing is scheduled for February 26.
Genesis holds 35.9 billion shares of GBTC, along with 8.7 million Grayscale Ethereum Trust (ETHE) and 3 million Grayscale Ethereum Classic Trust (ETCG).
Meanwhile, it further highlight that the net inflows for Bitcoin ETFs in its first 30-days surpassed those of State Street's SPDR Gold Shares ETF (GLD) in its first month.
Senior analyst Sam Callaghan from Swan Bitcoin shared on X (formerly Twitter) that there will be some "netting" in the crypto market due to Genesis' GBTC sales. However, there is uncertainty regarding the number of creditors who will sell their Bitcoin holdings.
Bitfinex head of derivatives Jag Kooner told Cointelegraph that the significant “discount” afforded to GBTC investors as a primary driver for the high volume of share selling in recent weeks.
