The $18.3 billion Grayscale Bitcoin Trust (GBTC), the world's largest bitcoin fund, extended its market discount to an all-time low of 30.79% this week as crypto markets experienced one of the most volatile weeks in recent memory, data shows.
Each share of GTBC has a bitcoin value of $26.46 as of Friday, according to Grayscale. GBTC itself is trading at $18.35 at the time of writing.
GBTC is currently one of the only ways for stock traders in the U.S. to participate in Bitcoin (BTC) price movements without having to buy the cryptocurrency itself.
For years, the GBTC fund traded at a premium to the underlying bitcoin price, but it turned negative in early 2021 due to several factors, including the introduction of spot-based exchange-traded funds (ETFs) in Canada, which provided an alternative for those looking to invest in bitcoin through an equity market vehicle.
The discount could be seen as a bearish indicator, as it could suggest a decline in trader interest in Bitcoin. However, it is also seen by some opportunistic traders as a way to acquire bitcoin cheaply.
GBTC Discount
Unlike exchange-traded funds (ETFs), the trust has no built-in market mechanism to ensure that the GBTC unit price trades close to the underlying value of bitcoin.
Grayscale applied to convert GBTC into a spot exchange-traded fund last year. Many analysts are skeptical that the U.S. Securities and Exchange Commission (SEC) will approve the conversion anytime soon, although some traders have bought GBTC to bet on the prospect of SEC approval; in that sense, a wider discount signals waning optimism for such approval.
And in the meantime, investors are being charged fees.
The recent selloff in cryptocurrencies may also have contributed to a wider GBTC discount. Bitcoin fell as low as $24,000 on Thursday before recovering to more than $30,000 early Friday. The asset has lost 23% over the past month on inflation fears and weak sentiment in the equity markets.
Grayscale's parent company, Digital Currency Group, also owns CoinDesk, which is run as an independent subsidiary.