The discount has resulted in heavy losses for some investors, but Grayscale is keen on offering the discount to attract more even traders.
The Grayscale Bitcoin Trust (GBTC) has descended into levels never recorded in its history. Data shows that the product is trading at a 19% discount. GBTC’s premium has notably failed to rise despite the firm adding $283.3 million in BTC under management earlier in the week.
Beginning Thursday, GBTC’s premium has dropped by nearly 19% according to YCharts. This is the first time in its history it has sunk this low. Additionally, it is now in its third month of negative trading. The drop in the premium comes despite the firm continued accumulation of Assets Under Management (AUM). On Wednesday, the investment firm confirmed an additional $1 billion in its AUM. Of this, $283.3 million was added to GBTC. Even Grayscale parent company Digital Currency Group, recently invested $250 million in GBTC shares. The firm’s total assets under management as of Thursday stands at $45.1 billion
04/22/21 UPDATE: Net Assets Under Management, Holdings per Share, and Market Price per Share for our Investment Products.
— Grayscale (@Grayscale) April 22, 2021
Unlike earlier in the year where such an announcement would receive major coverage and hype, it almost went unnoticed, more so in Bitcoin’s price reaction. Though it is proof that the asset is still in demand from institutions, the effect on actual price has faded.
Some institutional investors are reportedly already planning to exit the trust. Investment manager Marlton earlier in the month sent a letter to Grayscale calling for its shares to be tendered. The discount has resulted in heavy losses for some investors, but Grayscale is keen on offering the discount to attract more even investors.
GBTC Turning into a Bitcoin ETF
Some market observers are arguing that the trust has in recent weeks had to endure competition like the launch of the Canadian Bitcoin ETFs. This is a more attractive product for investors. In fact, Grayscale has stated it is fully committed to turning the Bitcoin trust into an ETF. The confirmed plans to re-apply for a Bitcoin ETF with the U.S. Securities and Exchange Commission (SEC). This is one of a few with the community optimistic that the SEC will be swayed by Canada’s success with its ETF.
Thus far, there is still a regulatory deficit in the US. This is part of the reason the SEC is yet to approve a Bitcoin ETF. However, there are rumours that the Biden administration is working on this. It is part of the reason Bitcoin shed over 5% on Friday.
In the US, a Bitcoin trust remains one of the best ways to get exposure to Bitcoin without actually holding the digital asset. But with an ETF, these will quickly crumble and the cracks are already showing. GBTC needs to be ahead in this to remain relevant.
Kiguru is a fine writer with a preference for innovation, finance, and the convergence of the two. A firm adherent to the groundbreaking capability of cryptographic forms of money and the blockchain. When not in his office, he is tuned in to Nas, Eminem, and The Beatles.