Grayscale's GBTC discount to NAV hits record low

Quick Take

  • Grayscale’s GBTC is trading at its lowest discount in the product’s history.
  • Concerns are mounting over Grayscale sister firm Genesis’s liquidity profile, but experts say those issues will be contained. 

In the wake of FTX's meltdown, one of the crypto market's most popular financial products continues to feel the pressure.

Grayscale's Bitcoin Trust — a product that offers bitcoin exposure through a fund structure — was trading at its lowest level below net asset value, according to data from Coinglass that show GBTC was trading at a 45.2% discount to NAV. 

Uncertainty looms over Grayscale's parent company, Digital Currency Group, which also owns troubled crypto lending firm Genesis Capital that is said to be seeking to line up a $1 billion "emergency loan" after the firm told clients it would suspend redemptions, according to Reuters

Grayscale said on Friday that it would not show proof of the bitcoin reserves that underpin its GBTC product, noting "security concerns." Still, executives at Coinbase, which holds custody of Grayscale's reserves, said on Nov. 18 that "the assets underlying all of Grayscale's digital asset products at Coinbase Custody ... are secure."

As pointed out by Bernstein, if Genesis is unable to raise emergency funds to shore up its liquidity profile, creditors wouldn't have a claim on Grayscale's assets. 

“GBTC’s trust structure protects its holders and remains ring-fenced from failures within DCG or DCG group entities,” Bernstein analysts Gautam Chhugani and Manas Agrawal wrote.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.