- Grayscale Bitcoin Trust (GBTC) shares sold for a record 42.69 percent discount from their intrinsic value after FTX crash, amid fears of market contagion.
- GBTC shares are trading at $8.75 as of press time, representing a 74% decrease in the year-to-date measure, and a 84% decline from when bitcoin peaked at more than $69,000 in 2021, according to data from Ycharts.
- For context, BTC itself is down 74% since that all-time peak. Data from Chyhart shows the value of assets under its control peaked at $43.58 billion back in November of 2021, but is currently sitting around $10.49 billion at the time of publication. The institutional bitcoin fund holds about 3.5% of all bitcoins in circulation.
FTX has been a key player in the crypto industry, but its sudden collapse has caused turmoil and brought the crypto industry to a breaking point. Cryptocurrency companies are now on the defensive, and the crypto industry could face a wider array of stability issues. It’s easy to attribute the FTX collapse to hubris, but there are other factors, such as a culture of secrecy and the failure of its young leadership team.
Increased scrutiny
After the collapse, lawmakers stepped up their scrutiny of the crypto industry. The House Financial Services Committee plans to hold hearings on FTX before the year’s end. It expects to hear from companies involved in the collapse and individuals, including FTX founder Sam Bankman-Fried. They also want to know about FTX’s internal anti-money laundering policies.
In addition to FTX’s failure, lawmakers are also concerned about the crypto lender BlockFi, which plans to file for bankruptcy. The company has acknowledged exposure to FTX, and plans to lay off workers.
But it’s unclear if Bankman-Fried has reached a settlement with BlockFi yet. Several crypto investors are seeking billions in compensation from Bankman-Fried. Bankman-Fried defended himself, saying that the company made bad decisions at times. But he also conceded that the company could have been reckless at times.
A spreading contagion
In the days following the collapse of FTX, there was speculation that the FTX ecosystem could also fall apart. The FTX ecosystem was interlinked with several companies, including Genesis, Alameda Research, and Three Arrows Capital. These companies collapsed earlier this year and spread fear across the crypto industry.
FTX is being investigated in several countries, including the Bahamas, where the company’s founder, Sam Bankman-Fried, is a commissioner of police. Several lawmakers are also questioning Bankman-Fried and are asking for documents related to FTX’s collapse. Lawmakers are particularly interested in a Reuters report that says Bankman-Fried transferred $10 billion in customer funds to a hedge fund he controlled.
The collapse of FTX has also sparked investigations across the U.S., and lawmakers have asked FTX for copies of the terms of its loans since the beginning of the year. In addition, the New York Department of Financial Services is monitoring the situation at Genesis.
In the days leading up to the collapse, lawmakers were also investigating the crypto lender Terra-LUNA, which collapsed earlier this year. In the weeks before, several users withdrew their cryptocurrency from FTX. The collapse spread fear throughout the industry, and a number of investors filed a lawsuit against Bankman-Fried, alleging that he broke the law and used strong-arm tactics to force investors to withdraw their assets.
A bankruptcy could wipe out billions of dollars of customer funds, and lawmakers are calling for a complete and transparent accounting of the company. As a result, the company has been forced to file for Chapter 15 in New York. However, the liquidators of the FTX group question the validity of U.S. bankruptcy proceedings.
Investigations loom
The House Financial Services Committee expects to hear from FTX and other companies in the coming weeks, as they investigate the collapse of the crypto industry. Among the lawmakers are Democratic senators Elizabeth Warren and Dick Durbin. They also have requested a series of documents from FTX, including a list of transfers between FTX and Alameda Research since the beginning of the year.
Jay Speakman is a technology writer based in San Francisco, California. He writes on the topics of blockchain, cryptocurrency, DeFi and other disruptive technologies. Clients include Avalanche, Be[in]Crypto, Trust Machines and several blogs devoted to blockchain gaming. He will not rest until fiat currency is defeated.
