Withdrawals from the Bitcoin ETF amounted to $800 million. What does this mean for the market?

Withdrawals from the Bitcoin ETF amounted to $800 million. What does this mean for the market?

Author: Robert Strickland (crypto-journalist)


Withdrawals from the Bitcoin ETF amounted to $800 million. What does this mean for the market?

Analysts at Coinbase have linked the outflow of funds from the Bitcoin ETF to the bankruptcy of Genesis.

The sale of shares in the Grayscale exchange-traded fund (ETF) by Genesis threatens to lower cryptocurrency prices.

Demand for Bitcoin ETF shares continues to influence market sentiment among cryptocurrency participants, while fundamental factors remain overlooked. This is stated in an analytical report by Coinbase.

Two months after its launch in January, during the period from March 18 to 20, net outflows from the Bitcoin ETF exceeded $800 million. The majority of this came from the Grayscale Bitcoin Trust (GBTC). Experts cannot precisely determine the reasons for the sharp increase in outflows from GBTC, from which investors withdrew $1.83 billion over four days.

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Against the backdrop of fund outflows, volatility in the leading cryptocurrency increased — on March 20, the price of bitcoin dropped by 10% to $60,775. However, by Monday, March 25, bitcoin had nearly fully recovered its losses. At the time of publication, it is trading around $66,800.

Coinbase reports that one of the potential sources of selling pressure could be assets from the cryptocurrency company Genesis, which pledged its 35.9 million GBTC shares, worth $1.2 billion, as collateral for loans from Gemini Earn users.

On February 6, creditors representing $2 billion in claims against Genesis, including the American cryptocurrency exchange Gemini, reached an agreement in court on a plan that involves DCG restructuring its obligations to Genesis by approximately $1.7 billion. Genesis will return these assets to Gemini in their original form. It is expected that after court approval, the funds will be returned to Gemini Earn users within several weeks.

According to documents filed in US bankruptcy court, Genesis's assets include Grayscale Bitcoin Trust shares worth approximately $1.4 billion, Grayscale Ethereum Trust shares worth $165 million, and Grayscale Ethereum Classic Trust shares worth $38 million.

Coinbase experts believe that the sale of GBTC shares by Genesis could cause pressure on asset prices in the cryptocurrency market.

According to the Financial Times, DCG previously sold shares of Grayscale cryptocurrency trusts at a significant discount to raise funds to repay Genesis's debts. Since January 24, the company has raised $22 million by selling around 25% of Grayscale Ethereum Trust shares at half their value.

Coinbase experts noted a noticeable change in the quantity of Grayscale Bitcoin Trust shares in circulation, coinciding with news about Genesis's payment obligations.

"It is important to note that most creditor payments will be made in cryptocurrency, not fiat," the report states. "Therefore, the impact on the bitcoin exchange rate in the long term should be neutral," Coinbase noted.

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