Cryptocurrency exchange Coinbase believes that the approval for bankrupt crypto lending firm Genesis to sell its Grayscale Bitcoin Trust (GBTC) shares won’t disrupt the crypto market. It argued that most of the funds will flow back into the crypto ecosystem, resulting in a neutral impact on the market.

Genesis was granted approval by a bankruptcy judge on Feb. 14 to liquidate around $1.3 billion worth of GBTC as part of its efforts to reimburse creditors.

However, following the approval for Grayscale Investments to convert GBTC into a spot Bitcoin exchange-traded fund (ETF) on Jan. 10, GBTC has experienced outflows exceeding $5 billion. There are concerns within the crypto industry that the recent approval for Genesis to also sell-off GBTC shares could lead to additional downward pressure on the price of Bitcoin (BTC).

Coinbase argued in its weekly report that while it’s unclear whether the additional GBTC outflows will go into other spot Bitcoin ETFs or directly into Bitcoin to reimburse creditors, it believes the funds will likely remain within the crypto ecosystem.

“Our view is that much of these funds will likely remain within the crypto ecosystem, contributing to a neutral overall effect in the market.”

It explained that the rules of the bankruptcy plan allow Genesis to either convert shares of the GBTC into the underlying Bitcoin asset on behalf of the creditors or sell the shares outright and distribute the cash.

The confirmation hearing is scheduled for Feb. 26.

Related: Bankrupt crypto lender Genesis seeks approval to sell $1.6B of trust assets

Genesis holds 35.9 billion shares of GBTC, along with 8.7 million shares of the Grayscale Ethereum Trust (ETHE) and 3 million shares of the Grayscale Ethereum Classic Trust (ETCG).

Meanwhile, it further highlighted that the net inflows for Bitcoin ETFs in its first 30 days surpassed those of State Street’s SPDR Gold Shares ETF in its first month.

Sam Callaghan, senior analyst at Swan Bitcoin, said in an X post that there will be some “netting” in the crypto market due to Genesis’ GBTC sales.

However, Callaghan stated there is uncertainty over the number of creditors who will sell their Bitcoin holdings.

I received some important context in the replies to this post…

Due to negotiations around in-kind vs. in-cash distribution, Genesis creditors will be paid out in BTC.

So there will be some netting here as these GBTC shares are sold and the Genesis estate buys spot Bitcoin to…

— Sam Callahan (@samcallah) February 13, 2024

Meanwhile, Bitfinex head of derivatives Jag Kooner indicated to Cointelegraph that the significant discount afforded to GBTC investors was a primary driver for the high volume of share selling in recent weeks.