Bitcoin Drops Below $40k As FTX Dumps GBTC Shares
Bitcoin dropped to its lowest price since November today after FTX bankruptcy estate dumped almost $1 billion worth of GBTC shares. The decline in price caused more than $200 million in liquidations.
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Bitcoin has dropped below $40,000 for the first time since November after outflows from Grayscale GBTC piled further selling pressure on the cryptocurrency. According to data from CoinMarketCap, BTC dropped more than 4% in the last 24 hours to reach as low as $39,450 before seeing a slight recovery.
The drop below $40k for Bitcoin is unsurprising, given how the flagship asset has performed since the spot Bitcoin exchange-traded funds were approved on January 11. Following the approval, Bitcoin rose as high as $49,000. But it has been declining since then, mostly because of the outflows from Grayscale Bitcoin Trust ETF.
Former BitMEX CEO Arthur Hayes even predicted that Bitcoin would drop below $40k and added that he had bought some March 29 $35k strike puts. He said the dumps will continue until the US Treasury announcement on January 31.
Meanwhile, Bitcoin has rebounded, with the asset going back above $40k. However, the asset remains very volatile and could fall below that level.
FTX Estate Dumped All GBTC Shares
The drop in Bitcoin value today is mostly a result of FTX estate dumping 22 million GBTC shares today. The shares worth about $1 billion account for a significant chunk of GBTC assets under management. With the sale, there have now been outflows of more than $2 billion from GBTC since the approval of spot Bitcoin ETFs.
The outflows have been taking a toll on the inflows accumulating to the other nine new Bitcoin ETFs. The result has seen Bitcoin price struggle, contrary to many who expected the ETF approval to be the event that pushes Bitcoin price up.
Some analysts have predicted that BTC will continue to drop or stay flat until GBTC is liquidated. GBTC's AUM is currently around $25 billion, meaning it could take more than a few weeks for that to happen. Chief Architect at BTCData Chris Terry blamed all these on Grayscale's decision to leave its fees at 1.5%.
However, Bitcoin investor Mike Novogratz does not expect the decline to continue for long. In his view, people would likely sell GBTC and rotate their funds into other Bitcoin ETFs. He predicted that BTC would be higher in six months.
Over $200 Million in Liquidations
The price performance of Bitcoin today left several options traders with losses as $243 million worth of positions were liquidated. According to Coinglass data, more than 91,000 traders were liquidated in 24 hours, the biggest being a Bybit - BTCUSDH24 valued at $5.00M.
Most of the positions liquidated were long positions, as these accounted for $210 million of the total liquidations. Bitcoin and Ethereum's long positions were $57.22 million and $56.25 million, respectively. It was not a good day to be bullish on cryptocurrencies.
