Bearish Signal? DCG Starts Selling Grayscale Crypto Shares At Almost 50% Discount

The issues at Digital Currency Group (DCG) seem to be coming to a head as the company has now begun offloading its Grayscale crypto shares. This move is one that was under speculation for a long time in the crypto community, as well as what kind of impact such a move could have on the market.

DCG Selling Grayscale Shares For Large Discount

Following Genesis Trading’s filing for bankruptcy last month, it was brought to light that the platform owed significant amounts of money to creditors. One of those creditors is the Gemini crypto exchange whose Earn customers are reportedly owed around $900 million. This obviously triggered liquidity issues for DCG, its parent company, which is now selling off Grayscale shares in an effort to keep afloat.

On Tuesday, Financial Times reported that DCG had filed a document with the US Securities and Exchange Commission which showed that the company was selling a significant portion of its holdings in Grayscale, another company that operates under the DCG umbrella.

According to the filing, DCG has now sold about a quarter of its holdings in the Grayscale Ethereum fund (ETHE). The company also sold off shares from various Grayscale crypto funds. These include the Litecoin fund, and the Ethereum Classic Fund, among others.

Interestingly, the company reportedly sold the shares for around 50% of what they are actually worth. The ETH fund shares were sold for approximately $8 each when their value compared to Ether is actually over $16. 

DCG CEO Barry Silbert defended the sale of the shares saying that they were “simply part of our ongoing portfolio rebalancing.” The sale is the company’s first sale in over a year since it last sold some of its Ether fund shares back in 2021.

ETHE share price at $7.64 | Source: Grayscale Ethereum Trust on TradingView.com

Will DCG’s Dump Affect The Crypto Market?

So far, DCG’s sale of its Grayscale shares has not had any impact on the movement of the broader crypto market. This could be because the company seems to be avoiding selling off any of its Grayscale Bitcoin Trust (GBTC) shares.

The GBTC is the largest Bitcoin trust in the world and with over $14 billion under management, the trust accounts for around 3% of the total BTC supply. As of January 2023, DCG reportedly holds around 67 million GBTC shares, a number that could definitely have an impact on the market if the company were to dump them. However, DCG is still holding on to its shares, which is good news for the asset, at least for now.

Nevertheless, both the GBTC and the ETHE are still trading at significant discounts to net asset value (NAV). This is because investors are unable to redeem the shares they hold for the digital assets held in the trust. Grayscale is currently locked in a legal battle with the SEC to turn the trust into a spot bitcoin ETF, which it believes would help close the massive discount.

As of the time of writing, the GBTC is trading at a 42.53% discount to NAV, while the ETHE is trading at a 51.11% discount to NAV.

ETHE discount to nav remains above 50% | Source: YCharts