Bitcoin Drops Below $40K: FTX Sells GBTC Holdings — Is a Market Rebound Coming?

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The beginning of 2024 has brought fresh volatility to the cryptocurrency markets, challenging investor confidence just as hopes were high for a sustained bull run. On January 23, Bitcoin (BTC) fell below the critical $40,000 support level for the first time since December, briefly dipping to $39,507.94 before a modest recovery. Despite earlier optimism following the long-awaited approval of spot Bitcoin ETFs, the market has instead been gripped by selling pressure and uncertainty.

What caused this sudden downturn? And more importantly, is this dip a buying opportunity—or the start of a deeper correction?

👉 Discover how market shifts create new opportunities for savvy investors.

Why the Post-ETF Rally Fizzled Out

The approval of spot Bitcoin ETFs on January 11 initially sparked a surge in BTC prices, pushing them toward $49,000. This milestone was widely seen as a major step toward mainstream adoption, with institutions expected to pour capital into the newly regulated products. However, the rally proved short-lived.

One key reason: massive outflows from Grayscale’s Bitcoin Trust (GBTC).

For over a decade, GBTC operated as a closed-end fund, meaning investors couldn’t redeem shares for underlying Bitcoin. This structure often led to shares trading at a premium or discount to net asset value (NAV). But once GBTC converted into an open-market ETF, shareholders gained the ability to sell directly—triggering a wave of profit-taking and portfolio rebalancing.

Here’s a breakdown of GBTC’s significant Bitcoin transfers to Coinbase Prime in early January:

These outflows reflect a broader trend: investors exiting higher-fee legacy structures in favor of lower-cost alternatives like BlackRock’s IBIT and Fidelity’s FBTC.

But one seller stood out—FTX, the now-bankrupt crypto exchange.

FTX Liquidates Entire GBTC Stake Amid Bankruptcy Proceedings

On January 22, just hours before Grayscale’s latest transfer, two sources revealed that FTX sold its entire 22 million shares of GBTC, equivalent to approximately $1 billion in value. This move wiped out its ownership in the trust entirely.

According to FTX’s November 3, 2023 bankruptcy filing, the company held positions in multiple Grayscale trusts through its brokerage account with Marex Capital Markets (formerly ED&F Man Capital). It also held nearly 3 million shares in Bitwise-managed trusts.

At the end of October 2023, FTX’s GBTC holdings were valued at around $597 million. By the time GBTC began trading as an ETF on NYSE Arca, its share price jumped to $40.69—boosting the value of FTX’s stake to nearly $900 million. The subsequent sale locked in substantial gains for creditors during liquidation.

Interestingly, Alameda Research, FTX’s former trading arm, dropped a lawsuit against Grayscale just one hour before the sale was reported. Alameda had previously accused Grayscale of charging excessive fees and blocking redemptions from GBTC and the Grayscale Ethereum Trust—claims it filed in Delaware courts in March 2023.

While no official link has been confirmed between the lawsuit withdrawal and the asset sale, analysts speculate that both actions align with broader restructuring efforts under FTX’s court-supervised bankruptcy process.

👉 See how institutional moves impact retail investors in real time.

Market Sentiment: Bottoming Out or Further Downside?

Not all voices are bearish. In fact, some top market participants see this pullback as part of a necessary correction.

Arthur Hayes, co-founder of BitMEX, suggested on X (formerly Twitter) that Bitcoin may be approaching a bottom—but not before testing lower levels. He revealed he purchased put options with a strike price of $35,000, expiring March 29, signaling his expectation that BTC could drop below $40,000 before rebounding.

Hayes also tied the decline to macroeconomic concerns, particularly around U.S. dollar liquidity tightening, which could intensify after the Treasury’s quarterly refinancing announcement on January 31.

Still, there are counterbalancing forces at play.

While GBTC suffered outflows exceeding $5 billion in less than two weeks, other spot Bitcoin ETFs are actively buying:

Michael Novogratz, CEO of Galaxy Digital—the firm assisting in FTX’s asset sales—echoed this sentiment on social media. He acknowledged short-term volatility but predicted that “indigestion” would clear within six months, paving the way for new all-time highs in Bitcoin.

What This Means for the Broader Market

Despite near-term turbulence, several fundamental catalysts support a longer-term bullish outlook:

Core Keywords:

The upcoming Bitcoin halving in April 2024—its fifth since inception—historically precedes major price rallies. By cutting block rewards in half, the event reduces new supply entering the market, often creating upward pressure when demand remains steady or grows.

Additionally, increasing institutional participation via regulated ETFs suggests deeper market maturation. Even if early flows favor competitors over GBTC, the net effect is greater accessibility and legitimacy for digital assets.

FAQ Section

Q: Why did Bitcoin drop below $40,000 after the ETF approval?
A: Despite initial excitement, heavy selling pressure from Grayscale's GBTC outflows and FTX’s liquidation of its holdings overwhelmed inflows into new ETFs like IBIT and FBTC.

Q: Are GBTC outflows a sign of weakness in Bitcoin?
A: Not necessarily. The outflows reflect structural changes—investors shifting from a premium-priced closed fund to lower-cost ETFs—not a loss of faith in Bitcoin itself.

Q: Will FTX’s sale of GBTC shares continue?
A: No. The sale of its entire 22 million-share stake marks the end of FTX’s exposure. Future asset disposals will likely focus on other holdings.

Q: Is now a good time to buy Bitcoin?
A: Many analysts believe current prices offer a strategic entry point ahead of the 2024 halving and potential macro easing later in the year.

Q: How do spot Bitcoin ETFs differ from futures-based ones like BITO?
A: Spot ETFs hold actual Bitcoin, offering direct exposure. Futures ETFs track derivatives contracts and can suffer from roll-over costs and contango effects.

Q: When might Bitcoin rebound above $45K?
A: If outflows from GBTC slow and inflows into other ETFs accelerate, a rebound could occur as early as Q2 2024—especially post-halving.

👉 Stay ahead with real-time insights on Bitcoin and ETF movements.

Final Outlook: Volatility Before Velocity

The current phase of the market reflects transition—not collapse. The conversion of GBTC into an ETF unleashed pent-up selling pressure that was always anticipated. Meanwhile, FTX’s orderly liquidation of assets helps reduce overhang risks.

As newer ETFs absorb capital and investor sentiment stabilizes, conditions are forming for a potential resurgence in BTC prices. Combined with the approaching halving and improving macro backdrop, many experts believe this dip is setting up the next leg of the bull cycle.

For informed investors, patience—and precision—may soon pay off.