Bitcoin - Massive outflows from the GBTC ETF

It seems that the GBTC ETF outflows related to the liquidation of Genesis assets have begun, hence the halt in Bitcoin’s rally.

The Bitcoin ETF GBTC is making headlines again

As we reported recently, the Gemini exchange has prevailed over Genesis regarding the ownership of 31 million shares in the Bitcoin ETF GBTC. The New York court’s decision should enable Gemini’s clients to recover part of their funds.

As a reminder, Genesis filed for bankruptcy in January of last year following the collapse of investment fund Three Arrows Capital. Consequently, the Gemini exchange – owned by the Winklevoss brothers – filed a lawsuit against their former partner Genesis.

The bankruptcy of Genesis has resulted in numerous disputes between Genesis, Gemini, and Genesis’s parent company, Digital Currency Group (DCG). One of the disputes concerned the ownership of shares in the GBTC ETF that were pledged as security for loans granted to Genesis under the “Earn” investment program.

Here are the latest statements from Gemini on its blog:

“We will be returning more than $1.8 billion (at today’s prices), which is $700 million more than when Genesis halted withdrawals on November 16, 2022. […] Users of the Earn program can expect to receive about 97% of their assets within approximately two months.”

After more than a year of waiting, the 100,000 customers of the Gemini exchange will finally see their bitcoins again.
However, these 31 million shares (~30,000 bitcoins) will be paid out in greenbacks. ETFs are not allowed to disburse bitcoins directly when liquidating shares.

In other words, the resolution of the dispute will mechanically lead to sales of bitcoins at first. It is also worth noting that the liquidation includes the equivalent of $200 million in ETH.

And given the recent resurgence of GBTC ETF outflows, it appears that the sales have begun:

🚨 $GBTC outflows est. at -$599 million on 2/29👇

Explains the BTC price drop today. pic.twitter.com/PBEoRjjvT2

— HODL15Capital 🇺🇸 (@HODL15Capital) February 29, 2024

The GBTC ETF outflows amounted to $600 million this Thursday. There have only been two slightly worse days since the launch of the ETFs. These outflows have completely offset the inflows into BlackRock’s ETF.

By the way, analyst Eric Balchunas says that the ETF IBIB represents only 0.2% of BlackRock’s ETF range but accounts for 42% of its net flows this year. So, there’s no need to worry too much about the recent slowdown in bitcoin.

For now, it remains above $60,000, a threshold revisited for the first time in more than two years. We’re even at a record high against the euro.

Bitcoin will certainly resume its upward trend very soon. Especially if Gemini’s clients immediately repurchase bitcoins.

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