Crypto exchange that filed for bankruptcy The fact that FTX holds nearly $417 million of Grayscale’s Bitcoin Trust (GBTC) raises questions about what will happen to the fund’s value when the estate sells off its shares. In order to prevent market saturation and price crashes, the management of FTX now plans to refund payments to creditors in fiat while carefully trading the assets, which include holdings of SOL, bitcoin, and ether. The development has raised hopes that an FTX fire sale won’t have a negative effect on GBTC’s discount to net asset value (NAV).
Analysts are currently projecting what would happen if the Securities and Exchange Commission (SEC) of the United States approves or rejects GBTC’s conversion into a spot ETF prior to FTX’s possible sales. Any GBTC sales from the FTX estate should mimic selling spot BTC if the conversion takes place, without introducing or expanding any discount to GBTC.
According to Scott Johnsson, general partner at Van Buren Capital, a restructuring plan for FTX‘s bankruptcy is unlikely to be confirmed before Q2 2024. The market should be clear about GBTC’s status and any possible repercussions of FTX’s asset sales given the anticipated SEC verdict on spot bitcoin ETFs to materialise before then.
On the other hand, FTX estate sales might put more pressure on the discount and possibly make it wider if GBTC’s conversion is not in place by then. Sean Farrell, head of Fundstrat’s crypto strategy, agrees with Johnsson and believes the SEC’s approval of a spot ETF will guarantee creditors get their money back. This might cause the GBTC discount to NAV to shrink more sharply and raise the price of all crypto assets. Farrell goes on to say that there is very little likelihood that the ETFs will not be approved by the SEC.