Following the FTX bank run, which accelerated by Nov. 7, Bitcoin (BTC) price started to buckle and, at the time of writing, lost 21% in five days. Among the victims of the swift market meltdown is the world\u2019s largest institutional Bitcoin fund, the Grayscale Bitcoin Trust (GBTC).\u00a0<\/p>\n
On Nov. 9, the GBTC closed at a record discount of 41%,\u00a0with a price per share\u00a0standing at $8.76. Overall, the GBTC has been gradually declining for almost a year since its peak position of $51.47 per share on Nov. 12, 2021. <\/p>\n
A structural problem of GBTC lies in the fact that it\u2019s an investment trust fund with its shares not freely created\u00a0nor offering a redemption program. This inefficiency creates significant price discrepancies versus the fund\u2019s underlying Bitcoin holdings.<\/p>\n
That is why Grayscale has been reportedly\u00a0trying to convert the GBTC to an exchange-traded fund (ETF),\u00a0which allows the market maker to create and redeem shares, ensuring the premium or discount is, at most times, minimal.<\/p>\n
The firm has been waiting for a final decision from the Securities Exchange Commission (SEC) since filing its application in October 2021. On June 29, SEC officially denied Grayscale\u2019s application to convert GBTC to a spot Bitcoin ETF. Then Grayscale decided to go to court \u2014 on Oct. 11, it filed the opening legal brief to challenge the SEC\u2019s decision. <\/p>\n
The current market crisis began on Nov. 2, after reports that a leaked balance sheet from the Sam Bankman-Fried-founded trading firm Alameda Research suggested the company held a significant amount of FTX Token (FTT), the native token of the FTX cryptocurrency exchange. A large trading firm holding so much of one asset concerned the crypto community and brought questions regarding the relationship between Alameda and FTX.<\/p>\n