Grayscale's Bitcoin Trust Experiences Record-Low Discount During FTX Collapse

After the demise of FTX, Grayscale Bitcoin Trust (GBTC) experienced a record-breaking 43% discount to the value of its underlying bitcoin assets.

KEY LESSONS

• The biggest Bitcoin fund, Grayscale Bitcoin Trust, enables investors to get exposure to bitcoin without actually purchasing it.
• GBTC is currently trading at a significant discount to Bitcoin amid the FTX turmoil.
• Cathie Wood from Ark purchased the Bitcoin Fund's decline.

Grayscale's Bitcoin Trust Is Still Declining

After FTX's demise, GBTC, which enables investors to access bitcoin without making a direct investment, has experienced a drop in recent months. The GBTC Bitcoin tracker fund, which is owned by the Digital Currency Group (DGC), which also owns Genesis, was introduced by Grayscale in September 2013. Due to the FTX debacle, Genesis reportedly sought a $1 billion rescue fund earlier this week before halting withdrawals from its platform. It's interesting to note that the Digital Currency Group also owns CoinDesk, the publication that first reported on FTX's dire financial situation.

The $10.5 billion in assets under management (AUM) that are used to buy and hold Bitcoin are held in the GBTC Bitcoin tracking fund. Around 12% higher than the decline in BTC is the 72% decline in GBTC over the past 12 months.

Cathie Wood from Ark sees value in GBTC

Because of the record-low discount to Net Asset Value, Cathie Wood's Ark Investment Management has added another 588,586 shares of GBTC for around $5.4 million (NAV). The asset manager's exchange-traded fund, called 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 fund.

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The fund hasn't bought GBTC since 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, and for $4.4 million, the Ark Fintech Innovation ETF purchased 140,877 shares of Silvergate Capital, a cryptocurrency bank.

The conclusion

The Bitcoin Trust tracking fund operated by Grayscale is now affected by the FTX exchange's consequences. Ark Invest expressed concern about spreading the problem in a recent newsletter by posing the question, "How much exposure to FTX and Alameda did these firms have?" Cathie Wood is benefiting from the FTX issue by acquiring GBTC at a discount in order to diversify her portfolio.