Grayscale, the world’s largest crypto investment company, is facing an FTX-like collapse. The company’s Bitcoin trust product continues to decline amid adverse market conditions.
Will Grayscale be the next FTX?
The investment firm announced in its November 18 statement that it would not share the proof of reserve with its clients. Proof of reserve was a trend that centralized exchanges started in the wake of FTX’s bankruptcy to regain investor confidence. Grayscale, on the other hand, hesitates to share its reserves with the public, citing fund security. This keeps the suspicions that it might be the next FTX. As Kriptokoin.com, we have included the company’s statements dated November 18 in this article.
5) To be perfectly clear: the $BTC underlying Grayscale Bitcoin Trust are owned by $GBTC and $GBTC alone.
— Grayscale (@Grayscale) November 18, 2022
Now concerns are that Grayscale will also suffer an FTX-like fate. Daniele Servadei, co-founder and CEO of Sellix, says Grayscale is stronger than FTX at this point. He states that his managers are more competent people.
Risks surrounding Grayscale
It is true and undeniable that the crypto market will suffer another drop if Grayscale does not fix its balance sheet. Also, the market is not strong enough to handle another crash so soon after FTX. Grayscale currently manages $10 billion in BTC and Ethereum. Digital Currency Group, the parent company of Grayscale, also owns companies such as Genesis, Foundry and Luno. DCG’s founder and CEO, Barry Silbert, addressed all the “noise” surrounding the company in a note to shareholders on Nov. He reported that despite the crypto winter, the company is on track to reach $800 million in revenue. He also stated that their separate organization is “operating as usual.”
“We have survived the previous crypto winters,” the CEO’s note read. There are also statements such as “While this may sound more violent, collectively we will come out of this stronger”. Silbert is an early Bitcoin advocate and a true cryptocurrency enthusiast. But unlike Sam Bankman-Fried, he has 28 years of experience. Before he discovered crypto, he was an investment banker in New York. He was the CEO of Second Market, a stock trading platform that he sold to the Nasdaq in 2015. In other words, he is one of the experienced names in the industry.
Silbert, along with Grayscale’s own leadership, is battling the SEC after regulators rejected an application to convert the Grayscale Bitcoin Trust (GBTC) into a spot ETF. The SEC made the move on the grounds that “the investment manager’s inability to answer questions about market manipulation concerns.”
Grayscale is fighting for the cryptocurrency market against the SEC
Grayscale later filed a petition with the U.S. District Court of Appeals challenging the decision. The US regulator began suing over what it called “arbitrary, capricious and discriminatory” decision. In other words: For anyone who cares about the future of crypto and believes in the importance of good-faith regulators to move the industry forward, Grayscale is putting up a good fight.
“The panic caused by others is not a good enough reason to circumvent the complex security arrangements that have kept our investors’ assets safe for years,” Grayscale said in a November 18 statement. They have proven their worth and have proven their reputation with a decade of steady growth. It is unlikely that this will change any time soon.”
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