In a significant development for the crypto world, Genesis Global has received authorization to offload approximately $1.6 billion worth of shares from the Grayscale Bitcoin Trust (GBTC), marking a pivotal moment in its financial recovery.
The backstory to this decision lies in the tumultuous period of the crypto winter, during which Genesis, a prominent lending platform, faced substantial challenges. These difficulties led to funds becoming locked up from clients of major platforms like Gemini and Bitvavo.
Grayscale Bitcoin Trust (GBTC)
Genesis’s acquisition of GBTC shares was multifaceted. Part of these holdings stemmed from serving as collateral for loans extended to the now-defunct 3AC fund. Additionally, the parent entity DCG (Digital Currency Group) facilitated the transfer of GBTC shares to Genesis. DCG, a significant player in the digital asset space, also holds a pivotal position as the parent company of the Grayscale Bitcoin Trust.
Genesis’s GBTC holdings, totaling 35 million shares, had long been a source of concern due to substantial losses incurred. Notably, these shares were trading at a discount of up to 50% compared to the underlying value of bitcoin. However, the recent transition of GBTC into an Exchange-Traded Fund (ETF) has effectively nullified this discount. Moreover, the remarkable resurgence of bitcoin, with its price more than tripling since the depths of the crypto winter, has further brightened the outlook.
Operating under Chapter 11 proceedings, Genesis required judicial approval to proceed with the sale of its GBTC shares. With this hurdle now cleared, Genesis is poised to receive an infusion of approximately $1.6 billion in cash, providing critical liquidity to partially address its outstanding debts, which currently exceed $5 billion.
Pressure on bitcoin?
The ramifications of Genesis’s sale of GBTC shares extend beyond its own balance sheet. Similar moves by other entities, such as the recent $1 billion divestment by FTX, triggered substantial outflows from Grayscale. As a consequence, market observers are keenly monitoring whether these sales will exert downward pressure on the price of bitcoin, which has demonstrated robust upward momentum in recent days.
