The largest Bitcoin (BTC) institutional investment vehicle is coming under suspicion as it trades at a record discount.

The Grayscale Bitcoin Trust (GBTC) is the latest Bitcoin industry entity to feel the heat from the debacle over the defunct exchange FTX.

FTX woes see Coinbase pledge trust in GBTC owner

With contagion and fears over a deeper market rout everywhere in Bitcoin and altcoins at present, misgivings are impacting even the best-known — and trusted — crypto industry names.

In recent days, it was the turn of GBTC, the long-embattled Bitcoin investment fund, amid problems at a related crypto firm, Genesis Trading.

As Cointelegraph reported, parent company Digital Currency Group (DCG), as well as operator Grayscale itself, swiftly sought to reassure investors and the market that its flagship product was financially watertight.

This did not appear enough to satisfy nerves, however, leading to additional public declarations of faith in DCG and GBTC.

Among them was Coinbase Institutional, the institutional investment arm of major exchange Coinbase.

“Nothing is more important than ensuring our clients’ assets are safe,” it tweeted on Nov. 17:

“With 10 years of expertise building a secure and compliant custody solution, Coinbase Institutional is proud to provide segregated cold storage custody services with our Qualified Custodian.”

GBTC’s image has been under strain for some time. Since 2021, it has traded at a discount to the BTC spot price, a discount which is now approaching 50%.

Amid a lack of demand, speculation has increased thanks to rumors that Grayscale may end up being bought should Genesis Trading fail.

This change of tack could have implications for GBTC, as Grayscale notionally remains intent on converting it to an exchange-traded fund (ETF).

“Though this is a difficult moment for many in crypto, I am deeply optimistic about the future of this industry, Grayscale’s business, and the opportunity for investors,” Grayscale CEO, Michael Sonnenshein, tweeted on Nov. 19.

Investor Lepard: “I have been buying more” GBTC shares

Consensus on the $10.5 billion GBTC potentially being forcibly sold remains weak.

Related: Grayscale cites security concerns for withholding on-chain proof of reserves

“Genesis may go under, but I find the odds of GBTC trust being liquidated to be highly unlikely just given the cash cow that it has been,” Lyle Pratt, creator of messaging platform Vida Global, reacted:

“More likely that someone like Fidelity buys it and keeps it operating.”

The steepening discount following the FTX saga has meanwhile made GBTC a somewhat ironic “buy” for names such as ARK Invest and Lawrence Lepard, investment manager at Equity Management Associates.

“Lots of questions and DM’s. Lepard view on Grayscale and GBTC Spoiler alert: I own it,” he began a dedicated Twitter thread by saying over the weekend:

“I have been buying more. It is still less than 5% of my BTC holdings in case I am wrong. Self sovereign key ownership is a must. And top priority.”

On the topic of how bad the contagion could be for DCG and its family of firms, Leopard nonetheless acknowledged that it “is impossible to know how much distress they are in.”

He continued to analyze the fallout should the worst-case scenario — bankruptcy — ensue.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.