This week, all eyes are on Grayscale and Digital Currency Group (DCG). In the worst case, the world’s largest crypto fund provider could liquidate some of its altcoin trusts.
The possible liquidation of grayscale altcoin trusts could affect the prices of already battered crypto assets. The DCG is the parent company of Grayscale and is heavily involved in contagion from the FTX crash.
On January 2, Gemini co-founder Cameron Winklevoss criticized DCG CEO Barry Silbert over the frozen funds. The twin exchange lent user funds to Silbert’s troubled Genesis brokerage. Genesis halted withdrawals following a liquidity crisis after the FTX implosion.
Now fears have surfaced that Grayscale may have to liquidate some of its trust funds to cover Genesis creditors. The company can start with the underperforming altcoin trusts.
Altcoin Trusts Under Pressure
In addition to its flagship BTC Trust (GBTC) fund, Grayscale offers a number of altcoin funds. Not including Ethereum, it has unique asset pools for the following altcoins: Basic Attention Token (BAT), Bitcoin Cash (BCH), Chainlink (LINK), Decentraland (MANA), Ethereum Classic (ETC), Litecoin (LTC), Solana (SOL), Stellar Lumens (XLM) and Zcash (ZEC).
Also, there are a couple of unknown funds, such as Filecoin (FIL), Horizen (ZEN), and Livepeer (LPT).
Analysts have listed the altcoins that would be affected the most. These have been listed in order of grayscale holdings as a percentage of the coin’s market cap.
According to those figures, Grayscale owns around 8.5% of the entire market capitalization of Ethereum Classic. This could be catastrophic for ETC if they were to liquidate this trust. ETC prices are already suffering badly as they are down 90% from their all-time high to trade at $16 today.
The Horizen ZEN token is also in the danger zone, with Grayscale holding 4.6% of its total cap. ZEN is currently down over 94% from its peak price, changing hands today for $9.26.
Zcash could also suffer with 2.5% of its market capitalization locked up in a grayscale trust. ZEC is down 98.8% from its ATH, trading at just under $40 today.
Grayscale Impact on BTC and ETH
The biggest fear, however, is the liquidation of his huge BTC trust. Grayscale controls around $10.5 billion worth of BTC, which is around 3.3% of the total market capitalization. More than 630,000 BTC flooding the markets would almost certainly send prices crashing to a new cycle low.
Ethereum would be in similar danger as Grayscale owns 3 million ETH or around 2.5% of its market cap. Investors and cryptocurrency executives around the world are praying that this scenario does not play out as the deadline for Silbert’s action approaches.
Disclaimer
BeInCrypto has reached out to the company or person involved in the story for an official statement on recent developments, but has yet to hear back.
