Grayscale Bitcoin Trust discount shrinks first time in a year as DCG and Gemini saga unravels

  • Gemini exchange is working on recovering $900 million in customer assets from Digital Currency Group-owned Genesis, to no avail.
  • The spat has weighed heavily on the Bitcoin market and the Grayscale Bitcoin Trust discount has reached 38.8%, shrinking for the first time in a year. 
  • The Digital Currency Group is likely to raise cash by selling their GBTC shares, increasing the pressure on the historically low GBTC discount.

Grayscale Bitcoin Trust (GBTC) shares could succumb to selling pressure from venture capital firm Digital Currency Group (DCG) unloading its GBTC shares. Crypto lender Genesis, owned by the DCG group owes $900 million to Gemini’s “Earn” product users and the two firms are embroiled in a long spat that weighs heavily on the market mood and leading crypto Bitcoin. 

Also read: Here’s what Bitcoin price needs to break out of the bear market in 2023

Gemini battles DCG for $900 million in user funds, builds up fraud allegations

Crypto lender Genesis, owned by venture capital firm Digital Currency Group, announced the need for a $1 billion liquidity injection in the aftermath of the FTX and Alameda crisis in 2022. Crypto exchange Gemini, co-founded by Cameron and Tyler Winklevoss, is struggling to recover $900 million in user assets from Genesis. The exchange has accused the lender of fraud after several failed attempts to recover the funds used to generate yield for their “Earn” product’s customers. 

The dispute between the two firms has been unresolved and grown larger, weighing heavily on Bitcoin and market participants in the ecosystem. Two key scenarios could play out, spelling different outcomes for Gemini’s “Earn” users and crypto lender Genesis. 

The DCG group has nearly 10% of Grayscale Bitcoin Trust shares on its balance sheet. After nearly a year, GBTC discount shrinked 10% since December 2022. In December GBTC traded at a discount of 48% and it has recovered to 38.8% since then. 

GBTC discount

GBTC discount 

While the above chart signals a recovery, GBTC could tackle rising selling pressure if DCG unloads its holdings. This is expected to influence Bitcoin price since GBTC is the preferred vehicle for many institutions to obtain regulated exposure to the risk asset. When GBTC swings from premium to a discount to Net Asset Value (NAV) it fuels speculative arbitrage in the market. 

NAV is the net value of an investment fund's assets minus its liabilities, divided by the number of shares outstanding; GBTC shares trade at a premium or a discount to this value. 

Therefore GBTC discount is a metric to keep eyes peeled on, when predicting the direction of Bitcoin’s price trend. In the event that DCG needs to raise cash or goes down the path of Chapter 11 bankruptcy, selling GBTC shares is a potential option. 

DCG would offload its GBTC shares in a market that's already illiquid and increase pressure on the historically low discount. DCG holds approximately 67 million shares and the daily trade volume is less than 4 million shares a day. However, DCG cannot sell more than 1% of shares outstanding every quarter and this slows the venture capital firm’s sale to a 2.5 year timeline. 

GBTC discount could continue shrinking consistently if DCG finds capital to stay afloat and avoids a bankruptcy filing. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content

Recommended Content

Editors’ Picks

Arbitrum community opens vote for 200 million ARB Gaming Catalyst Plan proposal

Arbitrum community opens vote for 200 million ARB Gaming Catalyst Plan proposal

Arbitrum community opened a vote for its Gaming Catalyst Program (GCP) to boost support for game builders in the ARB ecosystem. The plan is to strategically allocate 200 million ARB to game projects within Arbitrum. The token has sustained its gains from the week.

More Arbitrum News

ONDO extends gains by 4% with rise in non-empty wallets, hits new all-time high

ONDO extends gains by 4% with rise in non-empty wallets, hits new all-time high

Ondo extended gains by 75% increase in the past 11 days, per crypto intelligence tracker Santiment. The token ranks among top trending assets on the platform, with a massive spike in non-empty wallets. ONDO added 4% value to its price on Sunday, sustaining 40% gains from the week. 

More Ondo News

Aptos user transactions hit record high, APT eyes over 20% gains

Aptos user transactions hit record high, APT eyes over 20% gains

Aptos user transactions in a single day reached 97.488 million. The number of user transactions and Transactions Per Second, both metrics hit a record high, supporting the thesis for price gains in APT. The rise in transaction-related metrics can be attributed to Tapos, a viral clicker game where users can earn rewards. 

More Aptos News

US Presidential candidate Donald Trump is open minded to cryptocurrency, supports right to self custody

US Presidential candidate Donald Trump is open minded to cryptocurrency, supports right to self custody

US Presidential candidate Donald Trump shared positive views on crypto, posting on social media platform, “I am very positive and open minded to cryptocurrency companies and all things related to this new and burgeoning industry.” 

More Cryptocurrencies News

Bitcoin: BTC struggles, but $80K is at striking distance Premium

Bitcoin: BTC struggles, but $80K is at striking distance

Bitcoin (BTC) price is in a good position to resume the bull rally despite the recent struggle. Optimism will restart if BTC overcomes a critical hurdle and flips it into a foothold. In such a case, the pioneer crypto will be slated to push to a new all-time high (ATH). 

Read full analysis