The Biggest Bitcoin Fund Sets a Record Discount! What Is This Foreshadowing?

The cryptocurrency fund Grayscale Bitcoin Trust (GBTC), which currently holds 3.12 percent of the total Bitcoin (BTC) supply, or 640,000 BTC, is seeing a record discount compared to the value of its underlying assets. Here are the details…

Institutional interest “dries up”

According to the latest data, on September 23, the $12.55 billion trust fund (GBTC) was trading with a 35.18 percent discount. For investors, GBTC has long served as a great alternative to the risk in the Bitcoin market, despite the 2% annual administration price. This is mainly because GBTC is managed through a brokerage account. Because of this, institutional investors have had the chance to hold their BTC holdings more easily.

GBTC was mostly trading at a high premium against the Bitcoin price. However, after the launch of the first North American Bitcoin exchange-traded fund (ETF) in Canada in February 2021, it started to see a discount period. Unlike an ETF, Grayscale Bitcoin Trust does not have a cashback system. In other words, GBTC shares cannot be destroyed or created based on volatile demand at a greatly discounted price compared to spot Bitcoin.

Grayscale sued SEC for rejecting ETF application As we reported, Grayscale’s efforts to convert its trust fund to an ETF failed after the US SEC rejected this application in June. In theory, the SEC’s approval could have reduced GBTC’s rebate from current levels to zero. He could distribute the profits of those who bought the shares cheaper.

Grayscale sued the SEC for the rejection of its ETF application. But for many, it may take years for the court to make a decision. This means investors will be stuck with GBTC shares, which have lost more than 80 percent of their value from their November 2021 high. Additionally, GBTC’s 12-month adjusted Sharpe Ratio fell to -0.78. This indicates that the expected return on the stock is relatively low compared to the significantly high volatility. Namely, it establishes institutional interest in the Grayscale Bitcoin Trust.

Is this a “warning” for spot Bitcoin price?

Grayscale is the world’s largest passive Bitcoin investment vehicle by assets under management. However, it is not expected to have a strong impact on the spot BTC market after the emergence of competing ETF instruments. For example, crypto mutual funds attracted a total of around $414 million in 2022, according to CoinShares’ weekly report. In contrast, Grayscale; Bitcoin faced an outflow of $ 37 million in funds from Ethereum and other coins.

Instead, daily fluctuations in spot Bitcoin price are driven largely by macro factors. A stronger US dollar also undermines Bitcoin’s bullish prospects. The US dollar index (DXY) rose above 113, a 20-year high, on September 23.

However, several on-chain metrics suggest that Bitcoin may soon hit bottom based on historical information. However, technically, the price of BTC still risks falling into the $14,000-16,000 area, according to independent analyst provincial Capo of Crypto. The analyst uses the following terms:

It is more possible for Bitcoin to get rejected at the first resistance of 20,300-20,600. Wait for the bounce, then exit all markets.

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