Grayscale’s Bitcoin Discount Might Reach 70%, Details

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Arman Shirinyan

One of biggest trusts in cryp­tocur­ren­cy indus­try might face enor­mous sell­ing pressure

In the last few days, Grayscale’s Bit­coin Trust became the cen­ter of the mar­ket’s atten­tion as the poten­tial insol­ven­cy of Dig­i­tal Cur­ren­cy Group will most like­ly cause a cat­a­stro­phe for long-term GBTC hold­ers, as it will push the fund’s dis­count to a record-break­ing 70% to NAV.

At DCG’s recent board meet­ing, the top­ic of the poten­tial liq­ui­da­tion of its GBTC posi­tion has been brought up. By get­ting rid of the mas­sive posi­tion in Grayscale’s trust at a sig­nif­i­cant loss, Dig­i­tal Cur­ren­cy Group would be able to repay some of its liabilities.

Grayscale chart
Source: Ycharts

Recent­ly, DCG launched an urgent fundrais­ing effort to cov­er a $1 bil­lion hole on its bal­ance sheets caused by Gen­e­sis’ insol­ven­cy. As expect­ed, every pos­si­ble fund on the mar­ket reject­ed such a ques­tion­able offer, but DCG said it has no oth­er choice but to liq­ui­date any assets it can.

Discount you would not want to have

A mas­sive 70% dis­count to NAV might become a real­i­ty if major GBTC hold­ers start liq­ui­dat­ing their posi­tions, cre­at­ing a great buy­ing oppor­tu­ni­ty for some­one who has not yet received expo­sure to the cryp­tocur­ren­cy mar­ket. But it will be a dis­as­ter for long-term hold­ers of shares.

Even by pur­chas­ing GBTC in late 2021 at a large 20% dis­count, investors would still have to cope with enor­mous loss­es and poten­tial­ly drop their hold­ings to cov­er their lia­bil­i­ties in a man­ner sim­i­lar to DCG’s.

Pre­vi­ous­ly, on-chain sleuths have been active­ly look­ing for Grayscale’s Bit­coin hold­ings after the trust cri­sis emerged on the mar­ket and every insti­tu­tion in the indus­try was marked as poten­tial­ly insol­vent and unreliable.

At press time, GBTC’s dis­count remains at 45%, the high­est val­ue in the his­to­ry of the trust.

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