Bitcoin’s Grayscale (GBTC) Arbitrage Trade Goes From Hero Creator to Widow Maker

Grayscale Investments’ proposal to buy out certain holders of its flagship Bitcoin trust is the money manager’s latest bid to stanch losses in a fund that’s been a linchpin in the dramatic rise and fall of the cryptocurrency universe.

For years, the Grayscale Bitcoin Trust (ticker GBTC) served as the conduit through which billions of dollars flooded into crypto to exploit a seemingly automatic arbitrage trade. Now, some of those same industry titans are crumbling into bankruptcy while others contend with a wave of distress sparked in part by this very trade. Most famously, the trust attracted Three Arrows Capital, which held more than 5% of GBTC before the hedge fund’s demise over the summer.

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