Bitcoin recently experienced a correction to the $40,000 range amid rumors of significant sell pressure from Grayscale.
Investors pointed fingers at Grayscale, assuming the company was conducting massive sell-offs due to high fees, forcing them to sell and cut losses.
Bitcoin Investors Blames Grayscale for Price Correction
Contrary to circulating rumors, Grayscale’s selling had a different motive. According to Coindesk’s unconfirmed insider sources, the sell pressure on Grayscale’s GBTC (now transformed into a Bitcoin Spot ETF) has reached $2 billion.
This figure arose from the transition from GBTC to ETF, sparking speculation that Grayscale is actively selling BTC to reduce the available GBTC and mitigate potential losses.
Rumors suggested that investors were disinterested in Grayscale’s ETF due to its high transaction fees, exceeding those of most other Bitcoin ETFs.
The actual cause of the sell-off, however, appears different from the rumored scenario. Grayscale sells BTC when customers sell their GBTC, as each GBTC is backed by an equivalent value of BTC.
The purpose of selling BTC is to provide funds to customers, aligning with their GBTC sales. Contrary to the rumor that Grayscale aimed to cut potential losses, the sell pressure resulted from fulfilling customer demands rather than a strategic decision to mitigate losses.
Moreover, data from Coindesk clarifies that the sell-off was driven by Bitcoin Spot ETF sales by FTX and Alameda Research, entities previously in the form of GBTC.
According to Coindesk’s data, these entities, via FTX, sold 22 Bitcoin Spot ETFs, valued at around $900 million. Therefore, if this data is accurate, the correction is attributed to FTX, not Grayscale, as Grayscale was fulfilling its obligation to meet customer demands.
Declining Transaction Volumes for Bitcoin-Based Assets Since Last Week
The FTX sales complemented the existing sell pressure on Bitcoin Spot ETF assets, which began the previous week. Coinshares data reveals that from January 11, 2024, to January 19, 2024, Bitcoin Spot ETF assets worth $24.7 million were sold.
These sales coincided with sell pressure from Bitcoin miners facing electricity issues in Texas, the world’s largest Bitcoin mining location.
Miner sell-offs, combined with investor sell-offs of Bitcoin-based ETF assets, incentivized FTX to join the selling trend, avoiding further losses after the appreciating value of the assets.
During FTX’s last bankruptcy hearing around October 2023, the value of FTX’s GBTC assets was approximately $597 million. However, before the sell-off, the value had risen to $900 million.
FTX decided to sell 22 million Bitcoin Spot ETFs valued at $900 million, leading Grayscale to sell $900 million worth of Bitcoin, contributing to the negative narrative affecting many investors.
The good news is that with this sale, FTX’s entire ETF asset holdings have been liquidated, eliminating the potential for additional selling pressure from the company.
Nevertheless, the likelihood of Bitcoin price recovery remains slim due to impending U.S. data releases and the current unfavorable market conditions.
Traders and investors are advised to remain vigilant, avoiding FOMO (Fear of Missing Out) during corrections without proper risk management.
End-of-month conditions typically exhibit volatile movements, requiring continuous risk awareness from traders and investors.