BlockFi Winds Down Loans Backed by GBTC Stock, CEO Says

BlockFi once owned more than 5% of all Grayscale Bitcoin Trust stock, but now the cryptocurrency lender doesn’t directly maintain any at all


Blockworks exclusive art by Axel Rangel


key takeaways

  • BlockFi “directly holds zero GBTC,” CEO Zac Prince said
  • The lender suffered an $80 million loss from exposure to Three Arrows Capital

Cryptocurrency lender BlockFi currently has no positions in the Grayscale Bitcoin Trust (GBTC) and is unwinding loans in which shares of the fund are held as collateral, according to CEO Zac Prince.

Prince’s confirmation came in a Tuesday tweet, in which he responded to CoinShares’ chief strategy officer Meltem Demirors’ concerns that BlockFi still held GBTC shares on its balance sheet.

Turbulent market conditions have weighed on cryptocurrency firms, causing many lenders to pause withdrawals on their platforms for fear of a total collapse.

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BlockFi has managed to avoid freezing customer funds even as rivals like Celsius, Babel Finance and Vauld announced they would.

Celsius and Three Arrows Capital (3AC) negatively impacted BlockFi and triggered an uptick in client withdrawals, the company said earlier this month. Its exposure to 3AC also led to losses of about $80 million, but BlockFi said that was a small fraction compared to losses reported by other lenders.

Still, BlockFi had high exposure to GBTC, holding about 5.6% of its stock at one point. Shares of the product traded at a 34% discount to its net asset value on Wednesday. GBTC is down 64% year-to-date.

GBTC is the world’s largest publicly-traded bitcoin fund, commanding 654,885 BTC ($12.9 billion) — more than 3% of all BTC in circulation. The fund historically provided institutional investors such as BlockFi profitable arbitrage opportunities, back when GBTC shares traded at a premium on its assets under management, however those dried up last year.

In mid-June, BlockFi said it would reduce its headcount by 20% — so it wasn’t entirely unaffected by tough conditions. Cryptocurrency exchange FTX then agreed to support the firm by extending a $250 million revolving line of credit to bolster its balance sheet — a deal that Morgan Creek’s Mark Yusko said would give FTX the option to acquire BlockFi at no cost.

FTX eventually reached an agreement to purchase BlockFi for up to $240 million. The agreement involves a $400 million revolving loan, taking the total price tag to $620 million.

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