The Grayscale Bitcoin Trust (GBTC) is drawing market attention after sister company Genesis Global Capital said its lending unit would halt customer withdrawals as a result of fallout from the collapse of Sam Bankman-Fried’s FTX crypto empire, Bernstein said in a research report Monday.
The situation at Genesis, however, does not directly affect GBTC, the report said. Even if Genesis is unable to raise liquidity for its lending book and files for bankruptcy, creditors would have no claim on GBTC assets.
Grayscale Investments, which manages GBTC, and Genesis are both owned by Digital Currency Group (DCG), as is CoinDesk.
“GBTC’s trust structure protects its holders and remains ring-fenced from failures within DCG or DCG group entities,” analysts Gautam Chhugani and Manas Agrawal wrote.
The market is concerned that Grayscale could be “considered for strategic options in case of catastrophe,” the note said. But DCG, even in the most adverse scenario, would prefer to hold onto Grayscale over Genesis, it said. Greyscale is DCG’s “flagship business and its cash cow,” generating around $300 million a year in fees, according to Bernstein.
GBTC currently trades at a massive 45% discount to the price of the underlying bitcoin (BTC), the note said, meaning investors are trapped in an investment vehicle they can exit only after a six-month lock-in period and with a significant discount.
GBTC is the largest bitcoin investment vehicle and holds more than $10.5 billion of BTC. DCG and its affiliates own about 10% of GBTC, the note added.
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