The collapse of the cryptocurrency exchange FTX deeply shook the market. It is now debated whether the risk of FTX contamination will take other victims. Now eyes are on the Grayscale Bitcoin Trust (GBTC) after the SEC rejected its application. GBTC shares have not traded at a high relative to Bitcoin since last March.
GBTC has dropped to half the price of Bitcoin!
Shares of Grayscale Bitcoin Trust (GBTC) have reached a record discount to Bitcoin (BTC) price after the US Securities and Exchange Commission (SEC) reiterated its reasons for rejecting the application to convert the world’s largest Bitcoin fund into an exchange-traded fund. GBTC’s discount to Bitcoin exceeded 50% for the first time.
Crypto analysts, on the other hand, say that if the conversion occurs, the discount will likely close. In this case, they note that the current redemption process for ETF market makers will likely see the shares trade towards the underlying Bitcoin price.
Over the past few hours, the discount has since declined slightly to around 48.66%. GBTC, run by Grayscale Investments, was designed as a way to get investors in traditional markets to invest in Bitcoin. The fund currently has approximately $10.7 billion in assets under management. This figure has dropped 65% in the last 12 months, largely due to the sharp drop in crypto prices.
The fund is trading at a discount. Because while investors are free to sell GBTC shares in the market, there is no way to use their holdings in exchange for Bitcoin in the fund. And by the way, fund management charges them 2%.
Is GBTC next after the FTX crash?
Meanwhile, fears have surfaced that Genesis Global Trading, the crypto trading company owned by Grayscale’s parent company Digital Currency Group (DCG), may file for bankruptcy. That’s why the negative sentiment surrounding the fund has increased over the past few weeks. Grayscale says it works as usual. However, analysts suggest that any financial results for DCG will somehow affect GBTC.
Pablo Jodar, a crypto analyst at GenTwo, a financial services provider, says that some investors do not trust the information Grayscale discloses about the amount of Bitcoin they hold. Therefore, he notes that this also contributes to sales pressure. He also states that recent withdrawals from Binance may have dampened market sentiment. In line with this, “The market no longer trusts intermediaries. That’s why you see investors pulling money out of exchanges and financial instruments like GBTC,” he adds.
In addition, cryptocoin.comHedge fund Fir Tree has filed a lawsuit against GBTC to investigate potential mismanagement and conflicts of interest at Grayscale. The firm wants Grayscale to continue with refunds and lower 2% fees for its fund.
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