All eyes are on Grayscale and Digital Currency Group (DCG) this week. In the worst case, some altcoin trust funds are at risk of liquidation. The possible liquidation of grayscale altcoin trusts could affect the prices of crypto assets that are already in distress. DCG is the parent company of Grayscale and was heavily affected by the FTX collapse. Here are the details…
Concern grows over Grayscale’s altcoin funds
On January 2, Gemini co-founder Cameron Winklevoss criticized DCG CEO Barry Silbert for stagnant funds. Winklevoss’ exchange lent user funds to Silbert’s troubled Genesis brokerage. As we reported as Kriptokoin.com, Genesis stopped withdrawals after the liquidity crunch after FTX broke out.
Fears have now emerged that Grayscale may have to liquidate some of the trust funds to cover Genesis creditors. According to some, the firm may start with underperforming altcoin trusts. Grayscale offers a number of altcoin funds in addition to its flagship BTC Trust fund (GBTC). However, the funds with the highest assets are as follows:
- Bitcoin (BTC)
- Ethereum Classic (ETC)
- Horizon (ZEN)
- Zcash (ZEC)
- Ethereum (ETH)
- Litecoin (LTC)
- Bitcoin Cash (BCH)
- Decentraland (MANA)
Grayscale’s effect on prices
Analysts have listed the altcoins that will be most affected. These are listed in order of Grayscale assets as a percentage of the coins’ market value. According to these figures, Grayscale holds about 8.5% of the entire Ethereum Classic market cap. It could be a disaster for ETC if they liquidate this trust. ETC prices are already down 90% from their all-time high. Trading at $16 today, ETC is already in pain
The Horizen ZEN token is also in the danger zone. Grayscale holds 4.6 percent of its total value. ZEN is down more than 94 percent from its highest price. It changed hands today at $9.26. On the other hand, 2.5 percent of Zcash’s market value is in Grayscale. ZEC is trading just under $40 today, down 98.8 percent from its ATH.
The bigger fear, however, is the liquidation of the massive BTC trust. Grayscale controls about $10.5 billion in BTC, which is roughly 3.3 percent of the total market capitalization. More than 630,000 BTC pouring into the markets will almost certainly cause prices to drop to a new cycle low. Ethereum would be in a similar danger as Grayscale holds 3 million ETH, or about 2.5 percent of its market cap. As a result, many pray that this scenario does not happen.
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