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Genesis GBTC Sales to Stabilize the Cryptocurrency Market

Coinbase predicts that the funds from Genesis’ GBTC sales will remain within the crypto ecosystem despite fears of potential impact on Bitcoin’s price.

Coinbase believes that the bankrupt crypto lender Genesis’ approval to sell Grayscale Bitcoin Trust (GBTC) shares will not disrupt the digital currency market. It argues that most funds will return to the crypto ecosystem, thus having a neutral impact on the market. Genesis was approved by a bankruptcy judge on February 14 to dissolve around $1.3 billion worth of GBTC as part of its efforts to repay creditors.

However, after Grayscale Investments was approved to convert GBTC into a Bitcoin exchange-traded fund (ETF) on January 10, GBTC experienced outflows of over $5 billion. There are concerns in the crypto industry that Genesis’ recent approval to sell GBTC shares could also lead to further downward pressure on Bitcoin’s price. Coinbase argued in its weekly report that while it’s unclear whether additional GBTC outflows will go to other Bitcoin ETFs or directly to Bitcoin for creditor repayment, it believes the funds will likely remain within the crypto ecosystem.

“Our view is that many of these funds will likely remain within the crypto ecosystem, contributing to an overall neutral effect on the market,” it explained, noting that bankruptcy scheme rules allow Genesis to either convert GBTC shares into Bitcoin assets on behalf of creditors or sell the shares outright and distribute the cash. Genesis owns 35.9 billion shares of GBTC, along with 8.7 million shares of Grayscale Ethereum Trust (ETHE) and 3 million shares of Grayscale Ethereum Classic Trust (ETCG).

Meanwhile, it also emphasized that Bitcoin ETFs’ net inflows in their first 30 days surpassed those of SPDR Gold Street Trust ETF in its first month. Sam Callaghan, a senior analyst at Swan Bitcoin, said in an X post that there would be some liquidity in the crypto market due to Genesis’ GBTC sales. However, Callaghan mentioned that there is uncertainty regarding the number of creditors selling their Bitcoin assets. Jag Kooner, head of derivatives at Bitfinex, pointed out to Cointelegraph that the significant discount given to GBTC investors has been a major driver for the high volume of share sales in recent weeks.

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