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Grayscale Bitcoin Trust closes with 41% premium lost amid FTX meltdown

Bitcoin (Bitcoin) prices have started to fall, down 21% in five days at the time of writing. Among the victims of the rapid market collapse is Grayscale Bitcoin Trust (GBTC), the world’s largest institutional Bitcoin fund.

On November 9, GBTC closed at a record 41% discount at $8.76 per share. Overall, GBTC has been steadily declining for almost a year from its November 12, 2021 peak position of $51.47 per share.

The structural problem of GBTC is that it is an investment trust that cannot freely create shares. Nor does it offer a redemption programThis inefficiency creates large price discrepancies against the fund’s underlying Bitcoin holdings.

As such, Grayscale is reportedly trying to conversion GBTC Exchange Traded Funds (ETFs)which allows market makers to create and redeem shares, most of the time with minimal premiums or discounts.

The company has been awaiting a final decision from the Securities and Exchange Commission (SEC) since filing in October 2021. June 29th, SEC formally rejects Grayscale application Convert GBTC to Bitcoin ETF. Grayscale then decided to appear in court — October 11, filed an indictment Appeal an SEC decision.

The current market crisis began on November 2nd. A leaked balance sheet from Alameda Research, a trading company founded by Sam Bankman-Fried, the company held a significant amount (FTT), the native token of the FTX cryptocurrency exchange. A large trading firm with so many holdings of one asset has raised concerns in the crypto community and asked questions about the relationship between Alameda and FTX.

Related: The FTX and Binance Story in Progress: Everything That Happened So Far

Since that day, the situation has unfolded rapidly, leading to a full-blown “banking ruckus” for FTX users who began withdrawing funds from the data November 7 Departure from Nansen Indicated Stablecoin outflows on FTX reached $451 million in 7 days.