BlockFi Will No Longer Accept Grayscale GBTC Shares As Collateral, Unwinds All Positions

Crypto lenders in the market have been severely struggling to handle liquidity challenges. On Tuesday, July 12, crypto lender BlockFi announced that it will no longer be accepting Grayscale’s GBTC shares as collateral.

Following the news, the GBTC stock (OTCMKTS: GBTC) collapsed 5% on Tuesday ending at $12.21. Amid the Bitcoin price correction, the GBTC stock has been on a freefall this year. The share price of Grayscale Bitcoin Trust (GBTC) has corrected by nearly 65% year-to-date.

The recent decision from BlockFi highlights the fragility of the crypto lending industry and its exposure to insolvent companies. Grayscale had exposure to Three Arrows Capital, which was holding more than 5% of GBTC stock at one point in time.

Due to its bad debt with Three Arrows, BlockFi is already suffering losses to the tune of $80 million. BlockFi CEO Zac Prince spoke about their exposure in 3AC and added that they will be part of the embattled hedge fund’s ongoing bankruptcy case.

BlockFi Unwound Its GBTC Position

As per the latest information, BlockFi has already unwound all its GBTC position. On Tuesday, July 12, Zac Price replied to Meltem Demirors regarding the same. Prince tweeted:

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Hey Meltem 🙂 Just fyi – BlockFi directly holds zero GBTC. The Bloomberg data on this is outdated. We have a couple small loans (like sub $10M) w/ GBTC as collateral that are in the process of winding down.

Last month, BlockFi entered an agreement with FTX US to come out of its liquidity woes. As per the agreement, FTX US would extend a $400 million revolving credit facility along with the option for the exchange to acquire BlockFi for an amount of $240 million.

In comparison to other crypto lenders like Celsius Networks and Voyager Digital, BlockFi has been doing relatively well. Even in these distressed markets, BlockFi hasn’t stopped customer withdrawals, unlike its other peers.

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
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