Grayscale Bitcoin Trust lost 36.7% in asset value

Bitcoin drops 10% to $16,622 due to FTX-related liquidity crisis shaking crypto markets

While Bitcoin (BTC) continues to weaken in the broad market, the asset value of the Grayscale Bitcoin Trust (GBTC) - a bitcoin trust fund run by Grayscale Investment, hit record lows.

Grayscale Bitcoin Trust is making a significant loss on its balance sheet

The discount of GBTC shares in relation to the value of the underlying assets held in the fund widened to a record level of 36.7% on November 7 this year. It is also worth recalling here that Bitcoin itself has dropped by almost 20% in the last two weeks, which is due to the continuation of the bearish market after the consolidation that was underway earlier.

Cryptocurrency market analysts say the continued widening of the GBTC discount is a good illustration of the declining institutional demand for the largest cryptocurrency in terms of market capitalization, coupled with the availability of bitcoin ETFs to retail investors.

Henry Liu, CEO of BTSE - a retail infrastructure provider - recently wrote in a note to CoinDesk that the GBTC discount at such extreme levels was due to the liquidity crisis following the collapse of FTX.

All of this has led to reduced liquidity, much wider spreads, and increasing volatility across the crypto industry, and especially for BTC. We are definitely going through a tough period across the crypto sector right now, Liu said.

GBTC is a closed fund, which in simple terms means that BTC deposits are permanently blocked, but the shares of GBTC itself can be sold on the market after a six-month blockade.

Greyscale is suing the SEC

In June, Grayscale launched a court battle against the U.S. Securities and Exchange Commission (SEC), which rejected the company's request to transform the Grayscale Bitcoin Trust into a publicly traded fund.

In the past, Three Arrows Capital was one of the big GBTC holders. In an interview with Bloomberg in July, one of the firm's representatives said premium arbitrage trading was one of the main factors that led to the fund's collapse.