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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.
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.
Vladislav Sopov