Amid FTX Collapse, Grayscale’s Bitcoin Trust Hits Record-Low Discount

By
Kevin George
Kevin George
Full Bio
Kevin George is a freelance crypto writer and editor for Investopedia. He holds a master's degree in finance and has extensive knowledge and experience in the area of trading, markets, and economics.
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Published November 18, 2022
Crypto
Crypto.

Grayscale Bitcoin Trust (GBTC) fell to a record 43% discount to the value of its underlying bitcoin assets after the collapse of FTX. 

Key Takeaways

  • Grayscale Bitcoin Trust is the largest Bitcoin fund that allows investors to gain Bitcoin exposure without buying it.
  • Amid the FTX crisis, GBTC is trading at a major discount to Bitcoin.
  • Ark's Cathie Wood has bought the dip in Bitcoin Fund.

Grayscale's Bitcoin Trust Continues to Slump

GBTC, which allows investors to gain bitcoin exposure without investing directly, has seen a decline in recent months, which has worsened after FTX collapsed. In September 2013, Grayscale launched the GBTC Bitcoin tracker fund, which is owned by the Digital Currency Group (DGC), which also owns Genesis. Earlier this week, due to the FTX fiasco Genesis reportedly sought a $1 billion rescue fund before suspending withdrawals from its platform. Interestingly, the Digital Currency Group also owns CoinDesk, which broke the news about the poor financial health of FTX.

The GBTC Bitcoin tracker fund has $10.5 billion in assets under management (AUM) and those funds are used to buy and hold Bitcoin. The 72% fall in GBTC over the last 12 months is around 12% more than the fall in BTC.

Ark's Cathie Wood Sees Value in GBTC

Cathie Wood's Ark Investment Management has bought another 588,586 shares of GBTC worth about $5.4 million to take advantage of the record discount to Net Asset Value (NAV). The latest purchase of GBTC was added to the asset manager's ARK Next Generation Internet exchange-traded fund (ETF). The fund holds more than six million shares of GBTC, which is 4.84% of the ETF's weighting.

The latest GBTC purchase is the fund's first since 2021 as Wood has moved aggressively to buy the crypto dip. Ark also bought another 245,622 shares of the Coinbase exchange for $12 million, and the Ark Fintech Innovation ETF bought 140,877 shares of Silvergate Capital, a cryptocurrency bank, for $4.4 million.

The Bottom Line

The fallout from the FTX exchange has expanded to Grayscale's Bitcoin Trust tracker fund. In a recent newsletter, Ark Invest was worried about contagion, asking "How much exposure to FTX and Alameda did these entities have?" Cathie Wood is taking advantage of the FTX crisis to diversify her portfolio by purchasing GBTC at a lower price.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Y-charts. ''Grayscale's Bitcoin's Trust.''

  2. Grayscale. ''A Leader in Digital Currency Investing''
  3. The Wall Street Journal. ''Crypto Lender Genesis Had Sought Emergency Loan of $1 Billion''

  4. CoinDesk. ''Divisions in Sam Bankman-Fried’s Crypto Empire Blur on His Trading Titan Alameda’s Balance Sheet''

  5. Grayscale. "Grayscale Bitcoin Trust".

  6. Bloomberg. ''Cathie Wood Buys the Dip in Bitcoin Fund as Discount Hits Record''

  7. Ark Invest. "Ark Fintech Innovation".

  8. Ark Invest. "Newsletter #342".

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