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The Grayscale Trust (GBTC) is selling at a 48.62% discount, worrying investors and analysts. They believe a sell-off could be imminent as DCG also faces financial issues.
The crypto community is seeing its anxiety stoked as Grayscale’s GBTC is nearly at a 50% discount. As of Dec. 9, its GBTC discount or premium to NAV is at 48.62%. The GBTC shares are trading at $8.03.
Could the GBTC Discount Trigger a Selloff?
Market analysts and the general crypto community fear that the discount might trigger a selloff. One of the primary reasons for its concern is the fact that sister company Genesis halted withdrawals following the collapse of FTX.
Real question: is right now trading at a 50% discount.
They hold about $11 billion in
What's to prevent them from dissolving the fund, paying out the USD value to every GBTC holder, dumping the Bitcoin and thus pocketing $6 billion?
Satoshi Stacker (@StackerSatoshi) December 9, 2022
Parent company Digital Currency Group is also nearly $2 billion in debt, with almost $1.7 billion wondered to Genesis. Lumida Wealth CEO Ram Ahluwalia believes that DCG used its GBTC shares as collateral in the Genesis loan.
4/ We'll focus here on Loan #1 – ('GBTC Loan') – DCG pledged its GBTC holdings to borrow $575 MM from subsidiary Genesis Lending. We don't know the timing.
DCG purchased $778 MM of GBTC from March 2021 thru Jun 2022. DCG stopped purchases after 3AC blow-up, Source: 10Q
— Ram Ahluwalia, crypto CFA (@ramahluwalia) November 25, 2022
Ahluwalia also says that DCG has “enough revenue-generating power to absorb these liabilities and losses.” He doesn’t see an insolvency risk as a likely outcome. However, he noted that if Bitcoin drops further, the company could have issues.
DCG In a Tight Spot
The Digital Currency Group has been in the news this month — in trouble because of the Grayscale incident. Bernstein that DCG had a few different options on its table. It could raise capital, dissolve GBTC trust, or sell non-strategic assets and save Grayscale.
Analysts Gautam Chhugani and Manas Agrawal did note that the structure of the GBRC trust did protect holders “and remains ring-fenced from failures within DCG or DCG group entities.” Still, investors are concerned about the status of GBTC and whether it could lead to a further fallout in the market.
SEC Asks Crypto Firms to Disclose Details
The United States Securities and Exchange Commission () is also entering the debate on these crypto financial institutions. The agency has crypto firms to disclose details related to the crypto winter and the collapse of various companies to investors. It issued guidance for the same.
Generally speaking, it wanted these companies to divulge information regarding material exposure to financially distressed companies in the market. It’s a major step by the SEC, which had made it a point to watch the crypto market closely since the start of 2022.
Meanwhile, the SEC is investigating FTX, which is at the heart of the many financial troubles in the market. However, one pro-crypto lawmaker SEC Chair Gary Gensler for the collapse of the exchange.
