The world’s largest bitcoin fund has been trading at a negative premium for two months. GBTC is now less attractive as other financial instruments appear on the market.
Grayscale lost more than $ 1 billion to its leading item, the Grayscale Bitcoin Investment Trust (GBTC). It keeps its trading behavior at a significant discount compared to the volume of assets managed by the institutional investment fund.
According to data updated by Grayscale, on April 21, the assets managed by the fund were $ 36.46 billion. However, in the update on the 22nd, it reflected $ 35.285 million, a loss of $ 1.175 million, as bitcoin continues to face downward pressure, with the asset falling 19% this week, according to data from CoinMarketCap.
The particular situation with GBTC and its trading rate at a 19% discount is its lowest point in history, according to YCharts. This low point means that each GBTC share’s buy/sale is at a price 19% below its issue cost.
Grayscale Bitcoin Trust Crumbles down to Unexpected Levels
Until recently, GBTC was one of the few options for institutional investors to expose themselves to bitcoin. GBTC was catching a lot of interest as their share premium peaked at nearly 41% last year.
However, it became less attractive as more institutional investment items appeared on the market, such as the Bitcoin exchange-traded funds (ETFs) that have hit the market, three of them recently launched in Canada.
In March, Grayscale froze every intention to invest in GBTC. It did so a few days after the Bitcoin Trust traded at a discount that reached 15%, a figure below the value of BTC that each share represents. The drop has not received enough divulgation from the company since then.
The premium needed a push into positive territory, so Digital Currency Group, Grayscale’s parent company, announced that it would purchase up to $ 250 million worth of GBTC stock on March 10. But this purchase never came to fruition.
Recently, the firm announced that it wants to transform GBTC into a listed fund ETF. However, the company founded in 2013 did not explain detailed procedures with the United States Securities and Exchange Commission to crystallize this initiative.
Discount the Shares of GBTC in the Past
GBTC holders suffered a substantial burden due to the unexpected discount the shares of GBTC have traded in the past. Due to the insufficiency of an investment tool that could unlock retirement funds, GBTC was the only available option. Also, GBTC was able to command a vital premium to the net asset value.
Grayscale capitalized on this demand by bringing qualified investors the chance to invest in the trust at NAV, while the after-market designated a premium to NAV. The trust needed an initial investment of $ 50k with a lock-up period of one year. Once the lock-up period meets its end, the shares can find a spot on the secondary market.
By: Jenson Nuñez