Grayscale BTC closed on Wednesday the 9th of November at a record loss of 41%. It sold at $8.76/share. This followed the recent FTX crisis that reached a new pitch on the 7th of November.
FTX Crisis Hit BTC
Bitcoin price began to lose momentum and it has lost about 21% of its recent rally in a matter of five days. One of the biggest victims of the sharp market correction resulting from FTX’s situation is the Grayscale Bitcoin Trust. The firm is the biggest institutional Bitcoin fund in the world.
The 41% loss it closed with on the 9th of November was the widest margin of loss the firm would experience in a long time. The company’s shares sold at $8.76 per unit.
The Grayscale BTC has actually been on a path of steady decline for about a year. This followed its peak at $51.47 a share on the 12th of November 2021.
The major problem Grayscale BTC has is a structural one. It is essentially an investment fund and its shares are not created freely nor do they offer any redemption program. The inefficiency results in major price fluctuations against the actual Bitcoin holding the fund possesses.
This is the reason behind the firm’s attempt to change GBTC into an exchange-traded fund. The change would let the market maker create, as well as redeem shares. In turn, this would ensure that the discount is kept at a minimum level in the future.
Grayscale has waited long for the Security and Exchange Commission to give it final approval but nothing has come up yet. The firm filed for the application in 2021. The SEC, however, denied the conversion application on the 29th of June this year.
Grayscale followed up with legal action by suing the US SEC. The company filed the brief on the 11th of October to challenge the Commission.
But the recent crisis about its share value started on the 2nd of November after a file allegedly showed huge exposure to FTT. The document was supposedly from Sam Bankman-Fried’s balance sheet of Alameda Research.
The crypto community was concerned that such a large trading company would hold so much volume of one asset. It, therefore, instigated questions about the possible relationship between Grayscale and FTX/Alameda.
Consequently, there was a “bank run” of users trying to withdraw their holdings from FTX. As of the 7th of November, stablecoin withdrawals from FTX had risen to the worth of $451 million.
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