According to CoinDesk: Bankruptcy-stricken crypto exchange FTX owns approximately $417 million of Grayscale’s Bitcoin Trust (GBTC), raising concerns about the effect on the fund’s price when the estate winds down those holdings.
Currently, FTX's management intends to return funds to creditors in fiat, with a plan to cautiously trade the assets - including holdings of SOL, bitcoin, and ether - for avoiding market saturation and price crashes. The development has sparked optimism that GBTC's discount to net asset value (NAV) won't be adversely impacted by an FTX fire sale.
However, analysts are now speculating on the outcomes if the U.S. Securities and Exchange Commission (SEC) either approves or denies the conversion of GBTC into a spot ETF before FTX's potential sales. If the conversion occurs, any GBTC sales from the FTX estate should resemble selling spot BTC, without creating or widening any discount to GBTC.
General partner at Van Buren Capital, Scott Johnsson, posits that a reorganization plan for FTX's bankruptcy isn't likely to be confirmed until Q2 2024. Given the expected SEC decision on spot bitcoin ETFs to materialize before that, the market should have clarity regarding GBTC’s status and any potential effects of FTX’s asset sales.
Conversely, if GBTC's conversion is not in place by then, FTX estate sales could add pressure on the discount and potentially cause it to widen. Echoing Johnsson's views, Sean Farrell, the head of crypto strategy at Fundstrat, sees the SEC's approval of a spot ETF as a means to ensure creditors are made whole. This could lead to a more pronounced narrowing of the discount to NAV in GBTC and possibly spur overall crypto asset prices. Farrell further adds that the chances of the SEC not approving the ETFs are quite minimal.
