Grayscale Bitcoin Trust (GBTC) shares are selling at a record discount of 42.69% to the underlying asset’s value following FTX’s implosion and fears of market contagion.
According to Ycharts data, GBTC shares are trading for $8.75 as of press time, which represents a 74% decline on the year-to-date metric and an 84% drop since Bitcoin peaked at over $69,000 in 2021. For context, BTC itself is only down 74% from this all-time high.
Ycharts data showed that the value of assets under its management peaked at $43.58 billion in November 2021 but is now around $10.49 billion as of press time. The institutional Bitcoin fund holds roughly 3.5% of all BTC in circulation.
Today the #Grayscale Bitcoin Trust traded at a 43% discount to its NAV. With #Bitcoin trading at $16,700, shareholders of $GBTC were willing to sell their Bitcoin for the equivalent of $9,500. What does that tell you about retail and institutional investor confidence in Bitcoin?
— Peter Schiff (@PeterSchiff) November 17, 2022
FTX fallout may be far-reaching
The crypto community has speculated that the FTX implosion might have affected Grayscale’s parent company, Digital Currency Group.
Several stakeholders have highlighted that another company belonging to the venture capital firm Genesis recently halted customer withdrawals due to the FTX collapse.
Reports revealed that the crypto lender had failed in its plan to get an emergency loan of $1 billion from investors.
Hal Press, the founder of North Rock Digital, highlighted this concern in a Nov. 17 tweet where he noted that there was credible concern about the business of Digital Currency Group (DCG) and not just Genesis.
Press explained that there was no rationale for DCG to seek emergency funding “if the liability was on Genesis balance sheet and only pertained to Genesis.” He said:
“Why would DCG be trying to raise 1B through selling their own equity to save Genesis?… The answer is that the liability sits with DCG and DCG is now at risk. Furthermore, it’s not clear they are worth enough to raise the 1B by Monday and that’s the issue. What a mess.”
The Grayscale connection
The Financial Times reported that GBTC’s largest shareholder is DCG, with a 4.1% stake and the next largest holder is BlockFi, which recently filed for bankruptcy due to significant exposure to FTX.
This revelation has brought fear into the community as many believe that a Grayscale liquidation could severely impact the crypto market.
According to available data, Grayscale holds over 635,000 BTC worth over $10 billion and 3.1 million Ethereum, valued at $3.7 billion.
Press said the worst thing that could happen in the current situation would be DCG filing for bankruptcy, Grayscale getting dissolved, and around $9 billion of sell pressure on the two top digital assets.
https://t.co/5icW45C8IJ pic.twitter.com/qieUDWz7rc
— Hal Press (@NorthRockLP) November 17, 2022
Grayscale insist all is well
Grayscale has insisted that all is well with its business. The investment fund clarified that its assets were safe, secured, and not affected by recent events, including Genesis’s recent decision to halt withdrawals.
In the wake of recent events, our investors should know that the safety and security of the holdings underlying Grayscale digital asset products are unaffected. 🧵
— Grayscale (@Grayscale) November 16, 2022
The firm said Coinbase held all underlying GBTC assets in deep cold storage.
Meanwhile, Cathie Wood’s Ark Investment Management remains bullish as it bought $2.8 million GBTC shares on Nov. 15
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