Bitcoin price could face short squeeze, analyst says, as FTX sells nearly $1 Billion of Grayscale spot BTC ETF

  • Reports indicate that FTX liquidators sold about $1 billion of Grayscale's spot Bitcoin ETF.
  • The chunk represents one-third of total outflows, indicating selling is now done, in theory.
  • An analyst and crypto executive anticipate a possible short squeeze after a potential bounce.
  • CNBC Mad Money host Jim Cramer also hints at a possible move north in Bitcoin price.

Bitcoin (BTC) price broke below the ascending parallel channel during the January 12 crash that saw upwards of $130 million in total liquidations. Despite multiple technical indicators hinting at a possible extension south, one analyst and crypto executive has provided a different outlook centered on Grayscale spot exchange-traded funds (ETFs) sales.

Also Read: Grayscale Dumps BTC Explained: Understanding short-term bearish but mid and long term bullish spot ETFs

Bitcoin price could bounce as FTX liquidators sell about $1 billion GBTC

Billions of dollars worth of Bitcoin have been pulled out of Grayscale spot ETF (GBTC) since the investment products started trading on January 11. Citing persons close to the matter, a Coindesk report indicates that FTX accounted for much of these outflows after the exchange’s liquidators sold 22 million shares worth nearly $1 billion, taking FTX's GBTC ownership down to zero.

Specifically, the sales represent up to one-third (1/3) of the total outflows, with the report alluding to FTX completing the sale of its substantial holdings. This means that the exchange may not have any more GBTC to sell, with easing selling pressure likely to catalyze a bounce, according to Ran Neuner, founder of Crypto Banter.

Along with the bounce, Neuner anticipates a short squeeze. This is an unusual condition that triggers a rapid rise in the price of an asset. It occurs when the asset has many short sellers, meaning lots of investors are betting on its price falling. The short squeeze begins when the price jumps higher unexpectedly and gains momentum as a huge number of the short sellers decide to cut losses and exit their positions.

The news comes as FTX liquidators continue pushing toward securing funds for the exchange’s creditors amid an ongoing legal battle after the court approved the conversion of Grayscale’s GBTC into a spot BTC ETF. FTX sister firm Alameda Research reportedly had upwards of $9 billion in investor funds locked in Grayscale's Bitcoin Trust (GBTC) in the wake of the FTX implosion. GBTC holders were unable to easily exit their positions while the product was a trust.

Experts anticipate a bullish move in Bitcoin price

Meanwhile, experts anticipate a bullish move in Bitcoin price, with Glassnode co-founder Yan Allemann spotting a “Bullish divergence into Descending Wedge,” adding, “I think you will be very disappointed with your expectations of a break lower.”

CNBC’s Mad Money host, Jim Cramer, said, “Unlikely that Bitcoin finds its footing”, which reinforces the bullish supposition by Allemann.

This is because the Mad Money host has earned a reputation as the ‘Inverse Cramer,” and despite indications that he may have revised his stance on BTC, this does not invalidate his inverse reputation. Case in point, Cramer declared Bitcoin ‘indestructible’ ten days before the January 12 crash.

At the time of writing, Bitcoin price is trading for $40,686, representing a 2.45% drop on the day.

BTC/USDT 1-day chart

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