Cryptocurrency
Crypto Trust’s 50% Price Collapse Highlights Liquidity Hazard
As reported on Bloomberg, “Cryptocurrency enthusiasts are getting a reminder of the risks that remain in digital assets even while using structured investment vehicles. “The price of the Grayscale Ethereum Trust, which invests in the the world’s second-largest cryptocurrency, has tumbled more than 50% this week even though the value of the token has increased […]
As reported on Bloomberg, “Cryptocurrency enthusiasts are getting a reminder of the risks that remain in digital assets even while using structured investment vehicles.
“The price of the Grayscale Ethereum Trust, which invests in the the world’s second-largest cryptocurrency, has tumbled more than 50% this week even though the value of the token has increased slightly.
“The collapse is happening because so-called accredited investors such as hedge funds are liquidating holdings after their mandatory 12-month lockup for new placements into the trust has ended, said Nic Carter, co-founder of researcher Coin Metrics. The trust had traded at 800% premium to net asset value, he said.
“’This means that extremely inefficient situations can develop like the one we’ve seen recently,’ Carter said. ‘Bad news for retail investors that didn’t do their diligence.’ The trust’s shares are only available to institutional and accredited investors…”