Further Bitcoin sell-offs are coming, but they are unlikely to disrupt the market to any great extent. Since the approval of ETFs by the SEC, we have seen sales and liquidations of equity positions mostly in GBTC, the Grayscale ETF, who since the announcement its clients have taken profits on open positions since GBTC was a limited trust, plus, bankrupt companies have taken advantage of that upward movement to increase the portion of cash to give to their creditors.
In a previous article, I mentioned that behind Grayscale's financial instrument of ETF on spot Bitcoin, there were other old acquaintances that took advantage of liquidating positions before the eyes of bankruptcy judges and the expectant gaze of creditors, FTX was the most immediate case that closed a position of one billion dollars in GBTC shares a few days after the news of the ETFs, however, another known of that wave of bankruptcies of companies aimed at services in cryptocurrencies looms in the short term.
Relationship between FTX and Genesis
Let's remember that Genesis was a crypto sector company dedicated to cryptocurrency loans, which due to the bankruptcy of the FTX exchange had no choice but to declare bankruptcy in the face of serious liquidity problems.
This bankruptcy effect was due to the low price of assets such as Bitcoin, however, the real reason was the overleveraging and subsequent loss of customer assets by making irregular transfers to FTX subsidiaries for trading. Genesis for its part was a company injecting liquidity into FTX to grow its fraudulent business until it reached a point where it could not escape massive withdrawals from its customers.
FTX and Genesis were connected, which caused them to file for bankruptcy and seek a way to compensate creditors, and the two companies were in conflict as they sought to recover some of their assets.
Judge Announces that Genesis Must Sell Shares in GBTC
On February 14, a bankruptcy judge announced a decision on the GBTC shares held by Genesis, which will help to settle accounts with creditors. This announcement comes at a time of bullish momentum in the Bitcoin market.
Genesis Company to Liquidate about $1.3 Billion
Grayscale's sales will continue to be news in the crypto world, remembering that it is the clients of this financial giant that promote its movements, in this case a sale will take place that I imagine will be staggered, but will not take many days to complete.
1300 million is a significant amount for a single position in GBTC shares that directly influence the spot price of Bitcoin, however, there is the possibility that creditors change the financial instrument (GBTC) for the underlying asset (BTC), which would not affect the market, this is one of the possibilities according to the wishes of creditors and perhaps the upward movement will encourage them to keep the BTC for a sale later.
Although exchanging shares for Bitcoin is possible, it is undoubtedly the most optimistic way to go, the reality is that there is more likelihood of a liquidation of the shares in cash in order to make a corresponding distribution.
Opinion On The Effects On The Market
It may be that 1300 million is an amount that can make anyone tremble, however, this sale may not affect much the uptrend marked on the weekly Bitcoin chart, if we put it in perspective the BlackRock ETF called IBIT has accumulated more than 100 thousand Bitcoins since the ETFs approval, this kind of ETF driven buying balances the market, by following the trend of buying which as of today is positive, and by applying staggered selling, we might see some red candles, but it is unlikely to change the uptrend of BTC on the weekly chart just because of this liquidation.
In my view, this news comes to sink in at a good time, even though it may seem exhausting to see news still about FTX and Genesis in reference to Bitcoin sales, this has to happen at some point and if the thirst of the institutional for Bitcoin remains, it seems to me the best time for this kind of liquidations to happen, so the balance should remain positive for the market.
Possibly, the selling trend in the GBTC ETF will begin to increase, just as it did when FTX was due to liquidate its position, plus clients taking profits in this financial instrument, caused the price on the daily chart to pull back to points where people no longer trusted ETFs, all to then move up and demonstrate institutional interest in Bitcoin.
Market Equilibrium
Bitcoin price may enter a consolidation range having or forming a bearish directional structure, but that whose correction reaches a key moving average, for the price to seek the necessary liquidity to continue rising, also take into account sales outside the Genesis order as new purchases from institutional, however, I expect the market to balance.
Translated with www.DeepL.com/Translator
Posted Using InLeo Alpha