Exclusive: Bloomberg Article Analyzes Impact of Bitcoin Spot ETF: FTX and DCG Shorting on GBTC

In the nearly two weeks since the listing of the Bitcoin spot ETF, Bloomberg ETF analysts James Seyffart and Eric Balchunas have collaborated on an article titled “FTX and DCG Sales Likely Underpin Grayscale Bitcoin ETF Outflows,” which analyzes the situation of FTX and DCG dumping GBTC and summarizes the situation after the launch of the Bitcoin spot ETF.

Contents:
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FTX has actually completed its dumping
DCG is the largest holder
Galaxy and Marex play important roles in liquidation
GBTC selling pressure leads to a 1% discount
GBTC has the smallest spread, indicating operational efficiency

Since Grayscale’s GTBC fund successfully transitioned into a Bitcoin spot ETF, the price of Bitcoin has continued to decline. In recent days, it was reported that cryptocurrency exchange FTX has sold nearly $1 billion worth of the company’s shares.

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According to the Bloomberg report, FTX’s dumping should have ended, and their estimate of the amount dumped, $8-9 million, is not far off from our previous report.

The report also points out that FTX still holds Grayscale’s GDLC, LTCN, ETCG, and ETHE. However, Bloomberg analysts believe that since ETHE has the opportunity to transition into an Ethereum spot ETF this year, FTX should temporarily retain ETHE and liquidate the other three funds. Based on their price performance, GDLC, LTCN, and ETCG have been affected.

The latest statistics at the time of the report show that GBTC has experienced outflows of $3.45 billion. Aside from FTX, who are the remaining dumpers?

The largest “known” holder of GBTC is actually its parent company, DCG. They own 35.94 million shares of GBTC, worth $1.27 billion. The company has been in financial crisis in recent years, so analysts would be surprised if DCG did not participate in this sell-off. If we estimate the maximum value, FTX and DCG could contribute $2.4 billion in outflows.

FTX has designated Galaxy as its liquidation agent. Galaxy, along with Invesco, also participated in the Bitcoin spot ETF BTCO. The Bloomberg report indicates that Marex Capital Markets, an authorized participant (AP), played an important role in this liquidation.

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GBTC is still at a 1% discount, indicating selling pressure. Other Bitcoin spot ETFs have benefited from buying interest, with premiums ranging from 0.36% to 0.7%. However, analysts believe that these discounts and premiums will gradually decrease as the efficiency of arbitrage participants improves.

However, looking at the spread between GBTC and BlackRock’s IBIT and Fidelity’s FBTC, it is clear that GBTC has the smallest spread, indicating that it has not encountered trading issues since the ETF listing.

As a market pioneer, we can also see the scale and efficiency of Grayscale’s management. No wonder the CEO of Grayscale has so much confidence in their products and insists on not lowering fees. As for the future of GBTC, will it reduce fees under pressure from competitors? Can the Bitcoin spot ETF attract the attention of traditional investors in the long term and become a perennial investment product? Let’s find out together!

DCG
Eric Balchunas
FTX
GBTC
James Seyffart
Bloomberg
Bitcoin spot ETF

Further reading
US Financial Industry Regulatory Authority: 70% of crypto companies engage in violations, product descriptions contain exaggerations and misleading content
Funds can now successfully withdraw, FTX withdraws lawsuit against Grayscale