25 February, 2024

Grayscale Bitcoin Trust Falls, as the FTX Turmoil Hit Sister Company Genesis

1 year ago

22 Nov, 2023

Grayscale Bitcoin Trust Fund’s (GBTC) negative premium increased to 42.7%, and ETH Trust’s negative premium increased to 40.12%, both hitting all-time lows.

As investors sold more digital assets following last week’s high-profile collapse of crypto exchange FTX, Grayscale Bitcoin Trust, the largest bitcoin fund in the world, dropped by almost 7% on Wednesday.

Following the FTX fiasco, Genesis Global Capital, the lending division of cryptocurrency investment bank Genesis Global Trading, announced in a tweet that it was temporarily suspending redemptions and new loan originations.

Digital Currency Group (DCG), the parent company of Grayscale and Genesis, said that the company and its wholly-owned subsidiaries were unaffected by Genesis’ lending business being frozen.

However, Grayscale Investments tried to reassure investors they would not be affected by Genesis suspending withdrawals in the wake of FTX’s collapse and said it would be business as usual for its products and its underlying assets were unaffected.

Grayscale announced via Twitter on Wednesday that “Genesis Global Capital is not a counterparty or service provider for any Grayscale product.”

Despite Grayscale’s assertions, fears of a spillover from Genesis’ situation are likely to persist as Bitcoin and ETH Trust Funds reach record lows.

“Grayscale’s digital asset products are designed to provide investors with secure, transparent access to the crypto ecosystem,” said Grayscale CEO Michael Sonnenshein on Thursday. 

While this is a difficult time for many, the Grayscale team remains unwaveringly confident in the future of the crypto industry. Our team has been and will continue to advocate for greater regulatory clarity for our investors, and we hope to see positive momentum in that regard in the months ahead

he added.

The Grayscale Bitcoin Trust holds Bitcoin as its sole underlying asset. The Grayscale Bitcoin Trust trades like a closed-end fund that can trade at significant discounts and premiums, unlike physical gold ETFs that trade close to the net asset value.

Grayscale filed a lawsuit against the U.S. Securities and Exchange Commission in June after the agency rejected the digital asset manager’s proposal to turn a bitcoin trust into a spot bitcoin exchange-traded fund.

The Grayscale Bitcoin Fund, which is currently managing $10.7 billion worth of bitcoin, has slumped about 75% in the past 12 months.