YEREVAN (CoinChapter.com) – Since its launch in 2013, crypto investment vehicle Grayscale has created multiple funds that allow traders to invest in Bitcoin and multiple altcoins, such as Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), Zcash (ZEC), and others. But what will happen to the altcoin market if Grayscale liquidates to save Genesis?
Grayscale to rescue Genesis?
As CoinChapter previously reported, Grayscale, crypto lender Genesis, and crypto exchange Gemini are sister companies that belong to the Digital Currency Group (DCG). In detail, Genesis halted client withdrawals back in mid-November, hit by the contagion wave from the FTX debacle.
While Genesis did NOT officially file for bankruptcy, investor assets might not return to their rightful owners. The company requested an emergency $1 billion loan to set its affairs in order. But sister Grayscale might have to liquidate a part of its assets to help Genesis out of the debt hole.
Additionally, with Gemini clients pressuring DCG and Genesis, Grayscale might start from its underperforming asset funds.
Also read: Genesis on the verge of collapse – Grayscale Bitcoin Trust next?
Underperforming altcoins would go first.
As mentioned, the investment company owns a substantial percentage of the digital asset market, with Bitcoin Trust alone counting over $10 billion in assets under management (AUM). As seen in the chart below, the Bitcoin Trust has lost over $22 billion in AUM since April.
However, sources report that Grayscale’s altcoin funds are equally in trouble as the markets turned red throughout the year.
Ethereum Classic and others could be affected.
Judging by the numbers presented above, Ethereum Classic might be affected the most. Grayscale’s Ethereum Classic Trust (ETCG) year-to-date return was down 55% on Dec 29, with net assets at $185.7 million. The tweet above asserts that the Premium percentage on ETC is currently -77%.
It means that Grayscale offers the coin at a discount. Grayscale currently holds approximately $0.84 worth of ETC per share in their treasury. However, stock market traders can buy the same ETC-backed ETCG share for $3.05, i.e., the ETC-holding price per share is approximately 77% lower.
Net assets of $185.7 million make 8.5% of Ethereum Classic’s market cap, which stood at $2.18 billion on Jan 3. Should Grayscale liquidate, what would happen to the ETC price? Notably, ETC/USD traded at $15,7 in the New York session on Jan 3, after dropping 70% off its Apr 2022 peak.
However, Ethereum Classic is not alone. Several other assets, including Litecoin, might follow if Grayscale Trusts tumble, and a similar analysis could be done for each of them.
Crypto analyst @karl_0x agreed with the severity of Grayscale’s influence on the altcoin market but has since deleted the tweet.
Thus, investors should watch the investment company closely to better assess their best for or against certain digital assets. Notably, Grayscale has NOT liquidated any of its altcoin trusts YET. However, given Genesis’ shaky position, some liquidations are likely to follow.
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