These Altcoins Will be Hammered if Grayscale Needs to Liquidate


Grayscale and Digital Currency Group (DCG) are in the spotlight this week. A worst-case scenario could see the world’s largest crypto fund provider liquidate some of its altcoin portfolios.

The DCG, Grayscale’s parent company and heavily entangled in the FTX collapse contagion, may need to liquidate its altcoin trusts, potentially affecting the prices of the already battered crypto assets.

After FTX collapsed, Gemini cofounder Cameron Winklevoss lambasted DCG CEO Barry Silbert for freezing user funds. The twin’s exchange lent user funds to Silbert’s Genesis brokerage. Genesis halted withdrawals after a liquidity crunch.

Grayscale may have to liquidate some of its trust funds to pay Genesis creditors. The firm may start with the underperforming altcoin trusts.

Grayscale also offers several altcoin funds in addition to its flagship BTC Trust fund (GBTC). In addition to Ethereum, it offers 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), and Zcash (ZEC).

There are also a few obscure funds, such as Filecoin (FIL), Horizen (ZEN), and Livepeer (LPT).

According to analysts, the altcoins that would be most affected have been listed by Grayscale holdings as a percentage of the coin’s market capitalization.

Grayscale holds around 8.5% of Ethereum Classic’s market cap, which could prove devastating if they liquidate it. ETC prices have already fallen 90% from their all-time high, now trading at $16.

As for Horizen ZEN, Grayscale holds 4.6% of its total cap. ZEN is currently trading for $9.26, down more than 94% from its peak.

With 2.5% of its market cap locked up in a Grayscale trust, ZEC is down 98.8% from its all-time high, trading at just under $40.

BTC and ETH’s grayscale impact

However, the bigger fear is that Grayscale’s massive BTC trust will be liquidated. Grayscale controls around $10.5 billion in BTC, which is around 3.3% of the total market cap. If the market floods with more than 630,000 BTC, prices will almost certainly fall to new cycle lows.

Due to Grayscale’s holding of 3 million ETH or about 2.5% of Ethereum’s market cap, Ethereum would also be under threat. Crypto investors and executives around the world are praying that this scenario doesn’t come to pass before Silbert’s deadline.

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