GBTC premium hits -34% all-time low as crypto funds ‘puke out’ tokens

Published at: June 17, 2022

The largest Bitcoin investment vehicle, the Grayscale Bitcoin Trust (GBTC), is now trading at its biggest ever discount to the spot market.

Data from on-chain analytics resource Coinglass shows GBTC shares down 34% versus Bitcoin (BTC)/USD on major exchanges as of June 17.

GBTC suffers in market downturn

Amid continued turmoil in decentralized finance (DeFi) spilling over to infect the crypto market, conditions have deteriorated for investors big and small.

The latest figures now show that institutions have definitively failed to avoid the contagion, and the already underperforming GBTC has hit new lows.

The GBTC premium, long a misnomer due to the fund’s shares in fact costing less than Bitcoin itself, is circling its lowest values in history. On June 17, these traded at 34.2% cheaper than the Bitcoin spot price, also known as net asset value, or NAV.

A sharp downturn accompanied a similar dip on spot markets as BTC/USD retested $20,000 twice.

As Grayscale pursues United States regulators for permission to convert GBTC to a Bitcoin spot price exchange-traded fund (ETF), conditions continue to look unfavorable for crypto institutional products amid heightened government attention in the wake of the Terra and Celsius meltdowns.

While the firm remains buoyant on the outlook, GBTC’s performance has not escaped commentators, who point the finger at regulators for what they see as inaccurate risk assessment.

Bitcoin spot ETFs remain outlawed in the U.S. due to investor protection concerns, allowing countries such as Canada and Australia to gain first-mover advantage.

Shares of $GBTC are now 66.9% lower than they were at the peak of 2017 despite $BTC trading 5% higher. Make sure to thank Mr. Gensler for the protection everyone. pic.twitter.com/Q1cAw8hBtR

— Dylan LeClair (@DylanLeClair_) June 16, 2022

“Without ETF approval GBTC may go to -100% premium to NAV,” Vijay Boyapati joked this week.

Hayes names D-Day for crypto market bottom

This situation has not been helped by reported liquidity problems at multiple crypto funds with exposure to those already facing severe losses. Embattled Three Arrows Capital, known as 3AC, for example, is the largest GBTC holder with over 38.8 million shares.

Related: These 3 metrics suggest the Bitcoin price crash is not over

As 3AC fails to meet margin call requirements this week, a marked gap is opening between GBTC and its competition. The ProShares Bitcoin Strategy ETF (BITO), the first U.S.-approved ETF based on Bitcoin futures, has even added BTC to its assets under management in recent days.

For Arthur Hayes, former head of derivatives giant BitMEX, some of the biggest names in crypto institutional investing is thus facing a “River Styx” moment.

In his latest blog post on June 17, Hayes delivered a fresh blow to the fate of embattled projects Celsius, Terra and more.

“As this cohort of firms is forced to puke out any asset that is not locked in some long-term yield strategy, look out below,” he predicted:

“More indiscriminate selling of all liquid assets on their loan books will occur so these lending firms may return assets to their retail depositors.”

Having previously called a bottom of $1,000 for Ether (ETH) and $25,000 for Bitcoin, Hayes acknowledged that the reality had been much worse.

The upcoming July 4 holiday weekend, he added, should provide ideal conditions for a macro bottom, particularly as Q2 comes to a close.

“June 30 to July 5 is going to be a wild ride to the downside,” the blog post continues:

“My $25,000 to $27,000 Bitcoin and $1,700 to $1,800 Ether bottom levels lay in tatters. How low can we go? I believe we’ll find out on this fateful weekend.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Tags
Etf
Bitcoin
Bitcoin Price
Markets
Gbtc
Grayscale
Arthur Hayes
Bitcoin Investment Trust
Related Posts
Grayscale's Bitcoin premium has dropped to record lows below zero
Grayscale Bitcoin Trust ($GBTC) is currently the largest listed cryptocurrency asset with $30.17 billion in assets under management. The firm currently holds more than 655,730 BTC and the security is tradable in the United States through over-the-counter markets. How is GBTC different from a Bitcoin ETF? The fund was launched in 2013 and the Grayscale Bitcoin Trust became the preferred institutional vehicle in the U.S. for BTC due to the lack of a Bitcoin exchange-traded fund (ETF). Investment trust funds are regulated by the U.S. Office of the Comptroller of the Currency (OCC) and they are designed exclusively for accredited …
Etf / Feb. 27, 2021
Institutions increase exposure to Grayscale Bitcoin Trust as GBTC discount nears 30%
Institutional investors are returning to accumulate Grayscale Bitcoin Trust (GBTC) shares as the discount to spot price his risen to nearly 30%, data on Glassnode shows. Since December 2021, some weekly sessions saw investors pouring in between $10 million and $120 million into Grayscale's flagship fund. Meanwhile, the biggest capital inflow — amounting to nearly $140 million — appeared in the week ending on Feb. 25, as shown in the chart below. No selloff yet among high-profile GBTC backers The GBTC trust attracted investments as global markets faced back-to-back shocks in the past few months, including a dramatic selloff in …
Etf / March 6, 2022
GBTC discount presents a unique challenge for Grayscale and investors
Since 2013 the Grayscale Bitcoin Trust Fund (GBTC) has offered its investors exposure to Bitcoin (BTC) through a publicly quoted private instrument. However, the trust's convertibility and liquidity vastly differ from an Exchange Traded Fund (ETF). Trusts are structured as companies, at least in regulatory form, and are 'closed-end funds' which can initially only be sold to accredited investors. This means the number of available shares is limited, and retail traders can only access them via secondary markets. Furthermore, a GBTC share cannot be redeemed for the underlying BTC position. Historically, GBTC used to trade above the equivalent BTC held …
Etf / May 8, 2021
Grayscale may jumpstart the next phase of the Bitcoin bull run tomorrow
Bitcoin (BTC) may have traded sideways for much of last month thanks to Grayscale, but the status quo will soon change. According to data from on-chain analytics resource CryptoQuant, the price premium of the Grayscale Bitcoin Trust (GBTC) just hit its lowest since April 2019. Grayscale lock-up ends Wednesday Grayscale has made the headlines frequently this year thanks to record BTC purchases and record demand, but despite the inflows, BTC/USD has not continued to gain. As February begins, the Trust’s purchase premium is at around $6.50, having previously been as high as $40 over the course of its existence. This …
Bitcoin / Feb. 2, 2021
Grayscale BTC Trust trades at a record 36.7% discount, but is it justified?
U.S. investors have been waiting for a Bitcoin exchange-traded fund (ETF) approval since May 2014 when the Winklevoss Bitcoin Trust filed an amendment request at the Securities and Exchange (SEC). Over the years, the SEC has rejected every applicant and the latest denial was issued to WisdomTree’s application for a spot Bitcoin ETF on Oct. 11. The SEC concluded that the offer did not have the ability “to obtain information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws and rules.” Bitcoin investment trust vehicles have existed …
Etf / Oct. 15, 2022