Grayscale Bitcoin Trust (GBTC) Drops to New Lows by DailyCoin

Grayscale Bitcoin Trust (GBTC) Drops to New Lows
  • Investors left Grayscale Trust (GBTC) after its sister company, Genesis Global Capital, suspended client withdrawals on Wednesday, November 17.
  • GBTC is currently trading at a discount of 42.7% of the net asset value (NAV) of the bitcoin it holds.
  • GBTC owns 3% of the global supply of BTC.

The fallout from FTX affected Grayscale, one of the largest crypto asset management companies. Shares of Grayscale Bitcoin Trust (GBTC) are trading at record lows after news that its sister company Genesis Global Capital has suspended client withdrawals.

Grayscale is one of the largest digital currency investment and asset management companies in the world. Your Bitcoin Trust allows investors to gain exposure to Bitcoin without having to buy, sell, or store it in wallets.

GBTC owns 636,696 bitcoins, which are currently worth $10.6 billion. That’s roughly 3% of the global BTC supply.

The fund itself is trading at a discount to the underlying asset, which was the case even before the FTX crash. Despite that, it has attracted institutional investors who want to gain exposure to Bitcoin, but prefer to hold securities over crypto assets for compliance and security reasons.

However, the spread widened considerably after its sister company, Genesis Global Capital, revealed liquidity problems. GBTC is now trading at a discount of 42.7% of the net asset value (NAV) of the bitcoin it holds.

The discount narrowed slightly on Tuesday to 37.1% after Cathie Wood’s Ark Investment Management bought 315,259 GBTC shares. The last time Ark Investment Management bought shares in the fund was in July 2021.

Grayscale maintains “business as usual”

Grayscale maintains that it had no exposure to Genesis Global Capital and that its operations will not be affected by anything that happens at Genesis.

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“Following recent events, our investors should be aware that the security of holdings underlying grayscale digital asset products remain unaffected,” the company wrote on its Twitter page. Grayscale says that its products, including GBTC, continue to operate “as usual” and that the collapse of Genesis Global Capital will have no effect on operations.

“The underlying assets of $GBTC and all Grayscale products remain safe and secure, held in separate wallets in deep cold storage by our custodian,” they wrote. Genesis Global Capital and Grayscale are owned by the same parent company, Digital Currency Group.

Collapse of Genesis Capital and FTX

Genesis Global Capital, one of the world’s largest digital asset lenders, was the latest victim of the FTX collapse. On Wednesday, the company revealed that the collapse of FTX put it in a liquidity crisis.

“FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests that have exceeded our current liquidity,” the institutional lender stated. As a result, Genesis Capital said it would “suspend repayments and new loan origination in the lending business.”

Genesis Global Capital is the lending arm of cryptocurrency investment bank Genesis Global Trading, which provides institutional-grade loans to cryptocurrency holders. The company offers institutions the ability to borrow bitcoin and other cryptocurrencies in large amounts for fixed terms. It had $2.8 billion in active loans in the third quarter of 2022, according to its website.

In the reverse

  • As GBTC owns 3% of the world’s supply of BTC, its liquidation would be a significant blow to the Bitcoin price and the entire crypto market.

why should you care

The ever-increasing discount in Grayscale Bitcoin Trust (GBTC) shows that institutional whales are fleeing cryptocurrencies.

Read more about Genesis Global Capital and related entities suspending withdrawals:

Genesis lending arm Gemini Earn halts withdrawals as FTX contagion spreads

Read more about the consequences of the FTX collapse:

Will FTX’s Blowup be the last straw for Crypto?

See original on DailyCoin

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