Rumor has it that FTX legal team crashed Bitcoin this week

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Last Updated on 24 January 2024 by CryptoTips.eu

Whenever a disaster occurs, whether it has to do with nature, the economy or your own life, it is human nature to look for someone to blame to pass the buck. The last person you want to look at to blame is yourself of course. Human nature.

This is how populists become big of course. After all, any bad turn for the Western economy has been the fault of migrants and the unemployed for 100 years now. This is also the case in the crypto world where we’re happy when it goes up, but are outraged when it goes down. So it was not really too surprising that yesterday afternoon the blame for the crypto sell-off was placed on someone or something.

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Grayscale Bitcoin Trust (GBTC)

FTX’s legal team apparently sold 2 billion dollar worth of shares of the Grayscale Bitcoin Trust (GBTC) in order to raise funds for FTX’s former clients, fueling the sell-off in crypto. Allow me to explain.

Long before there was a Bitcoin ETF in the United States, you had the Grayscale Bitcoin Trust (GBTC), a stock fund that you could buy to purchase Bitcoin. However, because the American stock market watchdog SEC did not want to give official approval for a Bitcoin ETF when GBTC was launched (in 2013 already), only large companies could purchase GBTC through a special license.

Lower price

FTX was one of those companies as they knew that GBTC was trading at a lower price than the official Bitcoin price. The value of a GBTC share multiplied by the number of shares compared to the number of Bitcoins that GBTC had purchased multiplied by the price of Bitcoin meant that you could buy GBTC for a lower price than the value of the number of Bitcoins they had in their possession.

Sam Bankman-Fried, the founder of FTX, managed to exploit this difference and bought shares of GBTC for some 2 billion dollars.

When FTX went bankrupt in November 2022, those shares ended up in the hands of the legal team that handled the bankruptcy.

When they saw that GBTC was finally being turned into a Bitcoin ETF earlier this month, they started selling those shares in small blocks to raise money for the former FTX customers.

Until the news broke yesterday morning and everyone realized why Bitcoin (and the rest of the crypto market) fell so quickly. A snowball effect took place and the market experienced a sell-off.

Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
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