Following the FTX bank run, which accelerated by Nov. 7, Bitcoin 

BTC

$16,800

 price started to buckle and, at the time of writing, lost 21% in five days. Among the victims of the swift market meltdown is the world’s largest institutional Bitcoin fund, the Grayscale Bitcoin Trust (GBTC). 

On Nov. 9, the GBTC closed at a record discount of 41%, with a price per share standing at $8.76. Overall, the GBTC has been gradually declining for almost a year since its peak position of $51.47 per share on Nov. 12, 2021.

A structural problem of GBTC lies in the fact that it’s an investment trust fund with its shares not freely created nor offering a redemption program. This inefficiency creates significant price discrepancies versus the fund’s underlying Bitcoin holdings.

That is why Grayscale has been reportedly trying to convert the GBTC to an exchange-traded fund (ETF), which allows the market maker to create and redeem shares, ensuring the premium or discount is, at most times, minimal.

The firm has been waiting for a final decision from the Securities Exchange Commission (SEC) since filing its application in October 2021. On June 29, SEC officially denied Grayscale’s application to convert GBTC to a spot Bitcoin ETF. Then Grayscale decided to go to court — on Oct. 11, it filed the opening legal brief to challenge the SEC’s decision.

The current market crisis began on Nov. 2, after reports that a leaked balance sheet from the Sam Bankman-Fried-founded trading firm Alameda Research suggested the company held a significant amount of FTX Token 

FTT

$0.93

, the native token of the FTX cryptocurrency exchange. A large trading firm holding so much of one asset concerned the crypto community and brought questions regarding the relationship between Alameda and FTX.

Related: FTX and Binance’s ongoing saga: Everything that’s happened until now

The situation has been unfolding rapidly since that day, leading to a full-scale “bank-run” of FTX users who began to withdraw their funds from the exchange. Reported data from Nansen on Nov. 7 showed stablecoin outflows on FTX reached $451 million over seven days.