GBTC Bitcoin discount approaches 50% on FTX issues as investors stock up

GBTC Bitcoin discount approaches 50% on FTX issues as investors stock up

The largest institutional investment vehicle for Bitcoin (BTC) is coming under suspicion as it trades at a record discount.

Grayscale Bitcoin Trust (GBTC) is the latest Bitcoin industry to feel the heat from the debacle over defunct FTX exchanges.

FTX issues see Coinbase pledge confidence to GBTC owner

With contagion and fears of a deeper market rout everywhere in Bitcoin and altcoins at the moment, concerns are affecting even the crypto industry’s most well-known – and trusted – names.

Over the past few days, GBTC, the long-running Bitcoin mutual fund, took a turn amid troubles at a related crypto firm, Genesis Trading.

As Cointelegraph reported, parent company Digital Currency Group (DCG), as well as operator Grayscale itself, quickly sought to reassure investors and the market that the flagship product was financially watertight.

However, this did not seem enough to satisfy the nerves, leading to further public declarations of faith on the DCG and GBTC.

Among them was Coinbase Institutional, the institutional investment arm of the major exchange Coinbase.

“Nothing is more important than ensuring that our customers’ assets are safe,” it tweeted on 17 Nov

“With 10 years of expertise in building a secure and compliant custody solution, Coinbase Institutional is proud to offer segregated cold storage services with our qualified custodian.”

GBTC’s image has been strained for some time. Since 2021, it has traded at a discount to the BTC spot price, a discount now approaching 50%.

GBTC Prize Vs. asset inventory vs. BTC/USD Chart. Source: Coinglass

Amid a lack of demand, speculation has increased thanks to rumors that Grayscale could end up being acquired if Genesis Trading fails.

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This change could have implications for GBTC, as Grayscale remains conceptually set on converting it into an exchange-traded fund (ETF).

“While this is a difficult moment for many in crypto, I am deeply optimistic about the future of this industry, Grayscale’s business and the opportunity for investors,” Grayscale CEO, Michael Sonnenshein, tweeted on 19 Nov

Investor Lepard: “I’ve bought more” GBTC shares

Consensus on the $10.5 billion GBTC potentially being forced to sell remains tenuous.

Related: Grayscale cites security issues for withholding proof-of-chain for reserves

“Genesis could go under, but I think the chances of GBTC trust being liquidated is very unlikely just given the cash cow it has been,” Lyle Pratt, creator of messaging platform Vida Global, reacted.

“Someone like Fidelity is more likely to buy it and keep it going.”

Grayscale BTC holdings vs. BTC/USD Chart. Source: Coinglass

Meanwhile, the widening discount following the FTX saga has made GBTC a somewhat ironic “buy” for names like ARK Invest and Lawrence Lepard, chief investment officer at Equity Management Associates.

“Lots of questions and DMs. Lepard view on grayscale and GBTC Spoiler alert: I own it,” he began a dedicated Twitter thread by saying over the weekend.

“I’ve bought more. It’s still less than 5% of my BTC holdings in case I’m wrong. Even supreme key ownership is a must. And top priority.”

Combined Holdings of Grayscale Bitcoin Trust (GBTC) for ARK Invest ETFs (screenshot). Source: Cathiesark.com

On the topic of how bad the contagion could be for DCG and its family of companies, Leopard nevertheless acknowledged that it is “impossible to know how much trouble they are in”.

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He went on to analyze the fallout should the worst-case scenario – bankruptcy – occur.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should do your own research when making a decision.