Genesis Greenlit to Dump $1.3 Billion in GBTC Shares

• A US bankruptcy court has ruled Genesis to offload its GBTC shares. 
• Genesis looks to generate over $1 billion in additional liquidity following the sale. 
• The crypto lender’s sale comes at a time when GBTC struggles with outflows. 

Earlier last week, Bankrupt crypto lender Genesis sought court approval to liquidate its extensive list of Grayscale shares as part of its bankruptcy proceedings. With hopes of securing over $1 billion in additional liquidity, the firm aimed to strategically position itself to maximize returns for its creditors and stakeholders.

Although the crypto lender has been given the signal to sell, the motion comes when GBTC is at its weakest. 

Court Rules Genesis to Dump Grayscale Shares

In a February 14 hearing , a US bankruptcy court greenlit Genesis Global to offload its 35 million shares in Grayscale’s GBTC fund, totaling over $1.3 billion. Judge Sean Lane ruled the crypto lender could convert its shares in GBTC into either bitcoin or cash. 

Additionally, Genesis plans to liquidate 11 million shares in two Grayscale Ethereum Trusts, worth over $200 million, acquired following the bankruptcy of Three Arrows Capital. Although Genesis aimed to expedite the deadlines, the lender has yet to receive a court ruling to move with the sale. 

Digital Currency Group, Genesis’ parent company, tried to delay the proposed GBTC shares sale until the court finalized a debt repayment plan. The company clarified that it didn’t oppose Genesis selling the shares, but rather was concerned that the sales could be premature if the plan were rejected by the judge.

Still, despite intervention attempts, Genesis is proceeding with the sale. However, the timing of the motion comes just as GrayScale bears the brunt of outflows in the Bitcoin ETF industry.

Grayscale GBTC in Trouble? 

On January 10, the SEC approved the conversion of Grayscale GBTC trust to a spot Bitcoin ETF for listing and trading on US exchanges, alongside offerings from ten other asset managers.

Since the conversion, GrayScale has yet to see a positive day . The ETF has seen outflows amounting to a whopping $6.3 billion over the past month. 

Although GrayScale stands out as a veteran compared to the other nine issuers, having operated a $27 billion bitcoin trust since 2013 before converting into an ETF , its 1.5% fee has significantly hampered its success in the market.

In stark contrast, BlackRock and Fidelity, which lead the Bitcoin ETF scene, each sport a competitive fee of 0.2%.   

Nevertheless, GrayScale has begun to see better times as outflows stabilized, with February 9 marking the lowest daily volume of capital withdrawals since the conversion. However, Genesis could introduce more volatility and chaos to the market once it dumps its $1.3 billion GBTC shares.

On the Flipside

• Genesis will pay the SEC a $21 million fine from remaining bankruptcy funds to resolve the regulator’s lawsuit.
• Genesis Global and the New York Attorney General’s Office recently reached a settlement deal after being sued last year for defrauding New York investors.

Why This Matters

Although liquidating these Grayscale shares is a crucial step for Genesis to address financial challenges and meet obligations to creditors, it comes at a time when GBTC is at its weakest, struggling with mounting outflows.