Grayscale Approved To Sell GBTC Shares

Grayscale Approved To Sell GBTC Shares

According to a court filing, bankrupt crypto lender and trading desk, Genesis, has been granted permission by a US bankruptcy judge to sell is shares of Grayscale Bitcoin Trust (GBTC) worth $1.6 billion.

Not only will Genesis sell GBTC shares, but also those of Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Classic Trust (ETCG). This is part of the company’s plan to repay its creditors.

The approval

Genesis’ parent company, Digital Currency Group (DCG) had objected to the plan because it considered the sale premature in the overall bankruptcy plan, but it still got approved.

According to the DCG, the plan would result in creditors being overpaid. It argued in a court filing that a small controlling group of creditors is being favored in the repayment plan as compared to the rest.

It added that it was not in support of the plan and it should not be approved by the court either. DCG also highlighted the biggest issue with the plan in question.

The company said that some of the creditors would end up receiving a lot more than others because the prices of digital assets like Bitcoin (BTC) and Ethereum (ETH) have gone up since Genesis went bankrupt.

The plan

However, DCG had been unable to convince the judge. Genesis plans on using the proceeds for repaying customers and avoiding monthly fees that apply to its trust agreements.

This development is part of the broader liquidation plan of Genesis, which includes making settlements with regulatory bodies to give priority to customer repayments.

On February 26th, a court hearing is scheduled to consider the approval of the entire bankruptcy plan of Genesis.

Genesis’ troubles had first started in November 2022. It had already been common knowledge that the company had made loans worth billions of dollars to hedge fund Three Arrows Capital which also went bankrupt.

However, things had gotten dire for Genesis when the FTX crypto exchange and Alameda Research also began to fall apart. In January 2023, Genesis ended up filing for bankruptcy protection.

The impact

Meanwhile, the approval of the judge to sell off GBTC shares is going to result in more selling pressure in the market after there had already been a wave of similar sales in the past month.

After Grayscale received approval from the US Securities and Exchange Commission (SEC) to convert its fund to a spot Bitcoin ETF, there were several weeks of an intense sell-off.

Many investors opted to liquidate their GBTC shares, as they had not been able to do so when it was not a spot Bitcoin ETF.

Despite the persistent outflows since the conversion of GBTC, it remains the most dominant product in the market.

The assets under management of GBTC are about four times that of BlackRock’s iShares Bitcoin Trust (IBIT), which cleared the $5 billion milestone this week.

This is a significant metric because it means that IBIT’s fee has now doubled from its initial fee of 0.12% and reached 0.25%.