Will the Genesis sale of GBTC shares disrupt the crypto market?

Coinbase is certain that the proceeds from Genesis' sale of GBTC shares will flow back into the cryptocurrency ecosystem.

Coinbase predicts that Genesis GBTC sell-off will stabilize the crypto market.

Cryptocurrency exchange Coinbase believes that the approval for bankrupt crypto lending firm Genesis to sell its shares in Grayscale Bitcoin Trust (GBTC) won’t disrupt the crypto market. It argued that most of the funds will flow back into the crypto ecosystem, resulting in a neutral impact on the market.

Genesis granted approval to liquidate GBTC

Genesis was granted approval by a bankruptcy judge on Feb. 14 to liquidate around $1.3 billion worth of GBTC as part of its efforts to reimburse creditors. This move comes after Grayscale Investments received approval to convert GBTC into a spot Bitcoin exchange-traded fund (ETF) on Jan. 10, which resulted in outflows exceeding $5 billion.

Concerns within the crypto industry

There are concerns within the crypto industry that the recent approval for Genesis to also sell-off GBTC shares could lead to additional downward pressure on the price of Bitcoin (BTC). Many in the industry are worried about the potential impact on the market.

Coinbase’s viewpoint

Coinbase argued in its weekly report that while the destination of the additional GBTC outflows is uncertain, it believes that the funds will likely remain within the crypto ecosystem. In their own words, “Our view is that much of these funds will likely remain within the crypto ecosystem, contributing to a neutral overall effect in the market.”

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Bankruptcy plan and confirmation hearing

The rules of the bankruptcy plan allow Genesis to either convert shares of GBTC into the underlying Bitcoin asset on behalf of the creditors or sell the shares outright and distribute the cash. The confirmation hearing for this plan is scheduled for February 26.

Genesis’ holdings

Genesis holds 35.9 billion shares of GBTC, along with 8.7 million Grayscale Ethereum Trust (ETHE) and 3 million Grayscale Ethereum Classic Trust (ETCG). The sale of GBTC shares is significant due to the sheer amount held by Genesis.

Comparisons to Bitcoin ETFs and SPDR Gold Shares ETF

Coinbase further highlighted that the net inflows for Bitcoin ETFs in its first 30 days surpassed those of State Street’s SPDR Gold Shares ETF (GLD) in its first month. This indicates the growing popularity of Bitcoin ETFs among investors.

Analyst opinions

Senior analyst Sam Callaghan from Swan Bitcoin shared on X (formerly Twitter) that there will be some “netting” in the crypto market due to Genesis’ GBTC sales. However, Callaghan stated that there is uncertainty over the number of creditors who will sell their Bitcoin holdings. The impact on the market will depend on the actions of these creditors.

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