Grayscale’s Bitcoin Trust has been trading at a significantly lower value compared to Bitcoin’s price for the past 30 days.
The shares of the Grayscale Bitcoin Trust (GBTC), a closed-end fund that allows investors to gain access to Bitcoin in the stock market, are being traded below the price of Bitcoin for 30 days – unprecedented for a fund that, since its launch in September 2013, it was traded above the price of Bitcoin.
About 80% of investments in the fund, which now manages $ 38.5 billion, come from institutional investors, Grayscale said at the end of the third quarter of last year.
The discounted shares in the fund suggest that institutional investors are rushing to sell shares, perhaps preferring to invest their Bitcoin on a platform with a rate lower than Grayscale’s 2%.
To invest in GBTC, large companies such as the BlockFi lending platform and Singapore’s crypted asset hedge fund, 3 Arrows, sign the fund with Bitcoin.
To maximize their profits, institutional investors often make huge loans. This allowed 3 Arrows to invest $ 1.2 billion in the fund, according to a January document. The hope is that the premium will increase so that institutional investors can realize their profit by selling their shares.
But since the beginning of March, this bet has not worked. The price of each GBTC share remained below the corresponding amount of Bitcoin it represents. Large investors can sell their shares at a loss and can lose money on the interest they owe to creditors who provided the money they needed to buy the shares.
“It is not a systemic problem; it’s a GBTC problem, ”said Darius Sit, co-founder of Singapore cryptocurrency investment firm QCP Capital. As Canada’s Bitcoin ETF scene lights up with activity and US Bitcoin ETF orders are filed quickly, “GBTC is no longer the only player in town”.
On the other hand, in the absence of a Bitcoin ETF in the U.S., the Grayscale fund remains one of the only ways to invest in Bitcoin through a regulated investment product. “Prices would definitely go up someday,” trader Kushagra Singh speculated in an interview.