Bernstein says Grayscale Bitcoin Trust (GBTC) is secure incase Genesis Global falls

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Bitcoin
Bernstein says Grayscale Bitcoin Trust (GBTC) is secure incase Genesis Global falls

If Genesis is compelled to file for bankruptcy, some analysts believe GBTC assets won’t be subject to claims from creditors. After FTX’s demise, GBTC, which enables investors to access bitcoin without making a direct investment, has seen a drop in activity in recent months.

GBTC may be off the hook

According to a research report released by Bernstein, the issue at Genesis does not immediately impact GBTC. Creditors would not have any claim on GBTC assets even if Genesis fails to generate capital for its lending book and goes broke.

Since Sam Bankman-FTX Fried’s crypto empire collapsed, the company is now receiving market attention since sister company Genesis Global Capital announced that its lending section would stop allowing customer withdrawals.

Financial experts Gautam Chhugani and Manas Agrawal said,

“GBTC’s trust framework protects its investors and stays ring-fenced against problems within DCG or DCG group firms.”

The Digital Currency Group (DGC), which also controls Genesis, established the GBTC Bitcoin tracker fund in September 2013 and is controlled by Grayscale.

According to the paper, the market worries that Grayscale may be ‘considered for strategic alternatives in case of a calamity.’  However, DCG stated that it would choose to keep Grayscale over Genesis even in the worst-case situation. According to Bernstein, Grayscale is DCG’s ‘money source’ and its main company, bringing in over $300 million in fees annually.

The GBTC price is still declining

GBTC presently trades at a large 45% discount to the value of the underlying bitcoin (BTC), trapping investors in a product they can only leave with a hefty discount after a six-month lock-in term.

The $10.5 billion investments under management (AUM) utilized to buy and maintain Bitcoin are held in the GBTC Bitcoin tracking account. Approximately 12% higher than the decline in BTC is the 72% decline in GBTC over the past 12 months.

Fears in the community increase as GBTC trades at a record discount

Recently, the price of GBTC has been 45.08% below its net asset value. Because DCG, the largest holding, is currently dealing with concerns about financial difficulty, this is a record low.

Market expert Joe Consorti emphasized that the GBTC public filings were not reviewed. He said that the SEC punished the firm’s accounting firm, Friedman LLP, for not disclosing “inaccurate financial statements.”

Consorti highlighted that DCG had been obliged to purchase back GBTC’s shares due to stockholders such as 3AC and BlockFi selling their holdings. Even though it did not lessen the GBTC discount, this now puts DCG in a liquidity shortage.

Cathie Wood from Ark believes the GBTC is valuable

In these challenging times, it is encouraging to witness uplifting cooperative efforts. To reap the benefits of the historical discount to Net Asset Value, Cathie-Ark Wood’s Investment Management has added 588,586 shares of GBTC for around $5.4 million (NAV). The investment manager’s exchange-traded fund, ARK Next Generation Internet, now includes the most recent acquisition of GBTC (ETF). More than six million shares of GBTC, or 4.84% of the ETF’s weighting, are held by the company.

The firm last bought GBTC in 2021, but Wood has been actively buying the dip in cryptocurrency prices. For a total of $12 million, Ark also purchased an additional 245,622 shares of the Coinbase exchange. For $4.4 million, the Ark Fintech Innovation ETF purchased 140,877 shares of Silvergate Capital, a crypto bank.