Grayscale Bitcoin Trust (GBTC) Falls to New Lows

Investors dumped Grayscale Bitcoin Trust (GBTC) after its sister company, Genesis Global Capital, suspended client withdrawals on Wednesday, November 17th.
GBTC currently trades at a 42.7% discount from the net asset value (NAV) of the bitcoin it holds.
GBTC holds 3% of the world’s BTC supply.

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

Grayscale is one of the world’s largest digital currency investing and asset management companies. Its Bitcoin Trust allows investors to gain exposure to Bitcoin without needing to purchase, sell or store it in wallets. 

GBTC owns 636,696 bitcoins, currently worth $10,6 billion. That’s approximately 3% of the global BTC supply. 

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

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

The discount slightly narrowed on Tuesday to 37.1% after Cathie Wood’s Ark Investment Management bought 315,259 of GBTC’s shares. The last time Ark Investment Management purchased 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 be unaffected by anything that happens at Genesis.

Today Genesis Global Capital, a subsidiary of Grayscale’s affiliate, Genesis Global Trading, announced that it is temporarily suspending redemptions and new loan originations. Genesis Global Capital is not a counterparty or service provider for any Grayscale product. As a result:

— Grayscale (@Grayscale) November 16, 2022

“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,” the company wrote on its Twitter page.

Grayscale says that its products, including GBTC, continue to operate “business as usual” and that the collapse of Genesis Global Capital will have no effect on operations.

“The assets underlying $GBTC and all Grayscale products remain safe and secure, held in segregated 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. 

Genesis Capital and FTX Collapse

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

“FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity,” the institutional lender stated.

As a result, Genesis Capital said it would “suspend redemptions and new loan originations in the lending business.”

Genesis Global Capital is the lending arm of crypto investment bank Genesis Global Trading, providing institutional-grade loans to cryptocurrency holders. The company offers institutions the ability to borrow bitcoin and other cryptos in large quantities over fixed terms. It held $2.8 billion in active loans in the third quarter of 2022, according to its website.

On the Flipside

As GBTC holds 3% of the world’s supply of BTC, its liquidation would be a significant hit for Bitcoin’s price and the entire crypto market.

Why You Should Care

The widening discount on Grayscale Bitcoin Trust (GBTC) shows that institutional whales are fleeing crypto.

Read more about Genesis Global Capital and related entities suspending withdrawals:
Genesis’ Lending Arm, Gemini Earn, Halt Withdrawals as FTX Contagion Spreads

Read more about the fallout from the FTX collapse:
Will FTX’s Blowup be the Final Straw for Crypto?

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