Grayscale’s Bitcoin Trust (GBTC) is currently trading at a 43% discount to its asset value, or around $9,562 per Bitcoin, as opposed to the approximate $16,813 market price at the time of publication.
Similar to this, its Ethereum Trust (ETHE) is currently trading at a 41% discount, at around $718 per Ethereum, as opposed to the approximate $1,219 market valuation.
Notably, both show strong investor pessimism. Additionally, rumors contend that it occurs as worries regarding the stability of Digital Currency Group, the parent firm of Genesis Trading and Grayscale, increase.
Concerns about DCG Solvency
It is important to note that Genesis Trading, a platform for crypto lending for multiple major exchanges, including Gemini, has banned withdrawals due to a liquidity crisis.
The company had locked up $175 million on the now-defunct FTX exchange. However, according to a story by The Block, DCG intervened last Friday with a $140 million equity investment. However, it now seems that it was insufficient to keep the lender viable, as it has stopped withdrawals this week.
In order to satisfy client requests, Genesis reportedly plans to raise $1 billion by Monday. According to the research, the balance sheet’s illiquid assets are the cause of the liquidity crisis.
As a result, users are starting to worry about DCG’s health.
Hal Press, the creator of North Rock Digital, considers these worries to be reasonable in light of the required $1 billion loan request. Notably, Press asserts that Genesis is not worth that sum. Because of this, he thinks DCG is responsible.
The answer is that DCG is now at risk because of the liability, he writes. The problem is that it’s unclear whether they are worth enough to raise the 1B by Monday. What a disaster.
The worst-case scenario, according to @0xSisyphus, is that the corporation has a hole it cannot fill and may be forced to dissolve the Bitcoin and Ethereum trusts.
Notably, in the event of a dissolution of the Trust, shareholders may receive a payout in USD or the actual digital currency, according to Grayscale’s Form 10-K filing with the US Securities and Exchange Commission. The sponsor, however, has the final say in the matter.
A payout in USD as a result of the sale of digital assets is probably going to happen, if history is any indication. For instance, as one user points out, when Grayscale liquidated its XRP holdings and dispersed the cash proceeds to shareholders after dissolving its XRP trust in light of the SEC case against Ripple.
According to Coinglass data, Grayscale presently possesses roughly 633.7k BTC ($10.57 billion) and 3.05 million ETH ($3.68 billion). As a result, it can have disastrous effects on the crypto markets.
Nevertheless, a number of experts think this result is doubtful. For instance, analyst Alex Krüger claims that such action will harm DCG as well, making it counterproductive for them to take it.
The regulatory obstacles to dissolving the Trust, according to Financial Times Crypto editor Jeff Roberts, may be too onerous. In order to raise the necessary funds in a timely manner, he thinks the company may sell the cryptocurrency media and news portal CoinDesk.
As the FTX contagion dissipates, the overall state of the cryptocurrency market remains unknown.