Will the Sale of Genesis’ GBTC Shares Trigger a Market Crash? Coinbase: Most Funds Will Flow Back to the Cryptocurrency Ecosystem

Will the Sale of Genesis' GBTC Shares Trigger a Market Crash? Coinbase: Most Funds Will Flow Back to the Cryptocurrency Ecosystem

Will the Sale of Genesis' GBTC Shares Trigger a Market Crash? Coinbase: Most Funds Will Flow Back to the Cryptocurrency Ecosystem

Analysts from Coinbase, a US cryptocurrency exchange, believe that the sale of shares in the Grayscale Bitcoin Trust (GBTC) by bankrupt cryptocurrency lending firm Genesis will not disrupt the cryptocurrency market. They predict that most of the funds will flow back into the cryptocurrency ecosystem, resulting in a neutral impact on the market.

Last week, the Southern District of New York approved Genesis’s sale of 35 million GBTC shares, worth over $1.3 billion. The company stated that the process will be gradually completed with the help of brokers. Genesis also holds 8.7 million shares of the Grayscale Ethereum Trust (ETHE) and 2.9 million shares of the Grayscale Ethereum Classic Trust (ETCG), which will also be sold to repay creditors.

Since Grayscale was approved to convert GBTC to a Bitcoin Spot ETF earlier this year, over $5 billion has been withdrawn from GBTC. Industry experts have expressed concerns that the approval of Genesis’s sale of GBTC shares may lead to another downward pressure on Bitcoin prices.

Coinbase stated in its weekly review that it is still unclear how much of the additional GBTC outflow will be used to directly purchase Bitcoin to repay creditors, and how much will flow into other US Bitcoin Spot ETFs. However, the company believes that these funds will remain within the cryptocurrency ecosystem.

Coinbase analysts explained that Genesis’s bankruptcy plan allows the company to convert GBTC shares into Bitcoin assets on behalf of creditors, or to sell the shares directly and distribute cash. The confirmation hearing for the bankruptcy plan is scheduled for February 26.

Sam Callaghan, a senior analyst at Bitcoin financial services company Swan Bitcoin, stated on the X platform last week that when Genesis sells these GBTC shares and purchases Bitcoin Spot to repay creditors, there will be a certain level of netting in the market. However, Callaghan also pointed out that the number of creditors selling their Bitcoin holdings remains uncertain.

Coinbase also emphasized in its report that the net inflow of all Bitcoin Spot ETFs in the past 30 days ($3.3 billion) has exceeded the net inflow in the first month of the SPDR Gold Shares, a gold ETF issued by State Street ($1.85 billion), after adjusting for inflation.

Coinbase stated that the momentum brought by the substantial net inflow of Spot ETFs has helped the total market value of cryptocurrencies to recover to $2 trillion. Analysts believe that with more institutional participants adapting to the new ETF reality, as well as the current global narrative of currency reflation, Bitcoin (and the broader cryptocurrency market) should maintain strong support in the next 3 to 6 months.

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