Genesis’ GBTC Sale: Unpacking the Fears and Reality

The crypto community has been buzzing about Genesis’ plan to sell 36 million shares of Grayscale Bitcoin Trust (GBTC), worth around $1.5 billion. This announcement sparked concerns of a potential market downturn, similar to the one following the FTX bankruptcy estate’s sale of GBTC. However, a closer look reveals a less dire scenario.

No FTX-Like Crash in Sight

Genesis’ decision to sell GBTC shares stems from its recent financial challenges and legal entanglements. The primary sources of these GBTC shares are Genesis’ undercollateralized loan to Three Arrows Capital (3AC) and the collateral used for the Gemini Earn program.

In-Kind Bitcoin Redemptions: A Key Factor

The proposed Chapter 11 settlement requires Genesis to repay creditors in kind, meaning Bitcoin lenders will receive Bitcoin instead of USD. This in-kind repayment mechanism is crucial in understanding why fears of a market downturn may be overstated.

Mitigating Adverse Effects

The in-kind distribution was strategically chosen to prevent long-term BTC holders from being forced to recognize gains. This suggests that a substantial volume of lenders may not immediately sell their received Bitcoin, which could stabilize market reactions.

Current Market Situation

At the time of writing, Bitcoin is trading at $49,761.