The price of Bitcoin surged this week, touching highs not seen since the 2021 bull run. But will it last?
News has dropped that a U.S. bankruptcy judge granted bankrupt crypto lender Genesis permission to sell $1.6 billion in Grayscale Bitcoin Trust (GBTC) shares. The idea is to pay back creditors waiting on their cash since the lender went bust.
Just last month, the pressure from Grayscale flogging huge amounts of crypto to its custodian, Coinbase, led to a plunge in the price of BTC.
So it’s only natural to wonder if, when Genesis finally does sell, the same thing would happen again.
First, some background: Genesis is a subsidiary of Digital Currency Group (DCG) which used to allow people to earn interest on their crypto.
It filed for bankruptcy one year ago, revealing exposure to collapsed crypto venture fund Three Arrows Capital. After crypto megabrand FTX went bust in 2022, Genesis eventually froze customer withdrawals.
Creditors are still waiting on the cash they had locked into the product; DCG has said creditors will be made whole.
The plan a judge greenlit this week will allow it to repay creditors.
Experts don’t think the price of Bitcoin will be hit as hard, though. The reason? Massive interest in the newly approved spot exchange-traded funds (ETFs).
Bloomberg ETF expert Eric Balchunas told Decrypt that although it was possible the Genesis selling could have a negative impact, the ETFs have “showed off some real power,” which might prevent a big BTC sell-off.
After a decade of denying spot Bitcoin ETFs, the Securities and Exchange Commission in January approved 10 products. They started trading on January 11 and have been a roaring success, collecting billions in assets under management.
“The level of liquidity and resilience we have seen in Bitcoin over recent weeks is a testament to the high level of demand in the market,” blockchain data firm Arkham Intelligence’s CEO, Miguel Morel, said.
He added that he didn’t “expect [the Genesis news] to impact too much further beyond what we’ve already seen.”
Finally, Julio Moreno—head of research at on-chain and market data analytics firm CryptoQuant—agreed that “higher Bitcoin demand from Bitcoin ETFs” is more than enough to mitigate any downward pressure.
“It can be bearish for price at the margin—indeed, we saw price declining 5% the day FTX sold $1 billion worth of GBTC shares,” Moreno told Decrypt. “However, the impact may be limited given [that] the market is already expecting this selling.”
CryptoQuant data also shows relatively low unrealized profits for short-term bitcoin holders, which could also indicate low selling pressure, he added.
Edited by Ryan Ozawa.
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