Despite concerns that it would have an effect on the price of Bitcoin, Coinbase predicts that the proceeds from Genesis’ GBTC sell-off will “remain within the crypto ecosystem.”
Exchange of cryptocurrencies Coinbase thinks the cryptocurrency market won’t be negatively impacted by Genesis’ approval to sell its interests in Grayscale Bitcoin Trust (GBTC), an insolvent cryptocurrency lending company. It made the case that the majority of the money will return to the cryptocurrency ecosystem and have no effect on the market.
On February 14, a bankruptcy judge gave Genesis permission to sell off over $1.3 billion worth of GBTC in order to pay back creditors.
But since Grayscale Investments was given permission to convert GBTC into a spot Bitcoin exchange-traded fund (ETF) on January 10, the cryptocurrency has seen withdrawals totaling more than $5 billion. The cryptocurrency community is worried that Genesis’ recent permission to sell off its shares of GBTC could cause the price of Bitcoin to drop much further.
In its weekly report, Coinbase stated that although it’s not sure where the extra GBTC outflows will go—whether to other spot Bitcoin ETFs or back into Bitcoin to pay off creditors—it thinks the money will probably stay in the cryptocurrency space. “We believe that a large portion of these funds will probably stay in the cryptocurrency ecosystem, which will have a neutral overall impact on the market.”
It clarified that under the terms of the bankruptcy plan, Genesis is permitted to sell the shares and disburse the proceeds, or it can convert the GBTC shares into the underlying Bitcoin asset on behalf of the creditors. The confirmation hearing, however, is set for February 26.
Genesis owns 3. million Grayscale Ethereum Classic Trust (ETCG), 8.7 million Grayscale Ethereum Trust (ETHE), and 35.9 billion shares of GBTC.
Additionally, it emphasised that within the first 30 days of operation, net inflows for Bitcoin ETFs exceeded those of State Street’s SPDR Gold Shares ETF (GLD) during the first month of operation.
Sam Callaghan, a senior analyst at Swan Bitcoin, stated on X (previously Twitter) that Genesis’ GBTC sales may cause some “netting” in the cryptocurrency market. BOn the other hand, Callaghan said it is unclear how many creditors will liquidate their Bitcoin holdings.
According to Jag Kooner, head of derivatives at MeanBitfinex, the main reason for the recent spike in share sales has been the substantial “discount” given to GBTC investors.