Grayscale and Digital Currency Group (DCG) was the highlight of this week. According to media reports, in the worst-case scenario, the crypto fund provider could liquidate its altcoin trusts.
The downturn in the cryptocurrency market could take further damage with altcoin trusts to be launched. DCG, the parent company of Grayscale, FTX heavily affected by the stock market crash.
Gemini co-founder Cameron Winklevoss criticized DCG CEO Barry Silbert for frozen funds. Genesis, the Winklevoss twins exchange, had lent user funds to Silbert’s brokerage firm. Genesis stopped withdrawals after the liquidity crunch following the collapse of FTX.
Now Grayscale’s GenesisFears arose that it might have to liquidate some of its trust funds to cover its creditors. The firm may begin liquidations with underperforming altcoin trusts.
Altcoin Trusts Under Pressure
In addition to the BTC Trust fund (GBTC), Grayscale also offers a number of altcoin funds. With the exception of Ethereum, there are single-asset funds 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), Filecoin (FIL), Horizen (ZEN), Livepeer (LPT), and Zcash (ZEC).
NEWS CONTINUES BELOW
Analysts say that the altcoins that will be most affected are: ETC, ZEN, BTC, ZEC, ETH, LTC, BCH, MANA. stated.
if Grayscale is forced to sell their balance sheet to cover Genesis’ creditors, these tokens would be the most impacted pic.twitter.com/13Lo0yYPl9
— Karl (@karl_0x) January 2, 2023
According to these figures, Grayscale holds about 8.5% of all Ethereum Classic assets. This could be disastrous for ETC if they liquidate the asset. ETC price is trading at $16 today, down 90% from its all-time high.
The Horizen (ZEN) token also holds 4.6% of Grayscale’s total capital and is at high risk. ZEN is down more than 94% from its highest price and is trading at $9.26 today.
Zcash could also suffer as 2.5% of its market capitalization is locked in the Grayscale trust. ZEC is down 98.8% at its peak, trading just under $40 today.
How Will Bitcoin and Ethereum Be Affected?
Market participants’ biggest fear bitcoin The probability that their Trust will be sold. Grayscale operates around $10.5 billion in BTC, which is roughly 3.3% of the total market cap. Adding more than 630,000 BTC to the markets will almost certainly cause prices to drop to a new cycle low.
As Koinfinans.com reported, Ethereum would be in a similar danger as Grayscale has 3 million ETH, or about 2.5% of its market capitalization. Crypto investors and managers around the world are praying that this scenario does not happen as the deadline for Silbert’s action approaches.