Grayscale Bitcoin Trust (GBTC), a fund of crypto-currency that currently holds 3.12% of the total bitcoin (BTC) supply, or over 640,000 BTC, is trading at a record discount to the value of its underlying assets.
Institutional interest in Grayscale is drying up
On September 23, the $12.55 billion closed trust was trading at a discount of 35.18%, according to the most recent data. On the same topic: “Rug Pulling” Warnings: Coinbase Removes “How To Buy” Links From 3 Scam Tokens.
For investors, GBTC has long been an excellent alternative for gaining exposure to the bitcoin market, despite its 2% annual management fee. This is mainly because GBTC is easier for institutional investors to hold because it can be managed through a brokerage account.
For most of its existence, GBTC has traded at a significant premium to bitcoin spot prices. But it began trading at a lower price after the debut of the first exchange-traded fund. bag (ETF) North American Bitcoin in Canada in February 2021.
Unlike an ETF, Grayscale Bitcoin Trust does not have a redemption mechanism. In other words, GBTC shares cannot be destroyed or created based on fluctuating demand, which explains their heavily discounted prices compared to spot bitcoin.
Grayscale’s efforts to convert its trust into an ETF failed after the Securities and Exchange Commission (SEC) rejected it in June. In theory, the SEC approval could have reduced GBTC’s discount from its current level to zero, allowing those who bought the shares at lower rates to benefit.
Grayscale sued the SEC over the rejection of its ETF application. But in reality, the court could take years to reach its verdict, meaning investors would be stuck with their discounted GBTC shares, which have fallen in value by more than 80% since peaking around $55 in November. of 2021.
In addition, GBTC’s 12-month adjusted Sharpe ratio fell to -0.78, showing that the stock’s expected return is relatively low compared to its high volatility.
Clearly, institutional interest in Grayscale Bitcoin Trust is drying up.
A warning for the bitcoin spot price?
Grayscale is the world’s largest passive bitcoin investment vehicle by assets under management. On the same topic: Stellar Lumens (XLM): Can Crypto Hit $1 in 2022? Opinion and prediction. But it doesn’t necessarily have a strong hold on the bitcoin spot market after the rise of rival ETF vehicles.
For example, crypto investment funds attracted a combined total of almost $414 million in 2022, according to the CoinShares weekly report. By contrast, Grayscale saw outflows of $37 million, which includes its Bitcoin, Ethereum and other token trusts.
Rather, the daily fluctuations of the bitcoin spot price are strongly determined by macroeconomic factors, at least for now.
A strengthening US dollar is also hurting bitcoin’s bullish outlook, given its consistent negative correlation over the past year in a higher interest rate environment.
For example, the US dollar index (DXY), which measures the greenback’s strength against a basket of major foreign currencies, rose above 113, its highest level in 20 years, on September 23. Similarly, 2-year and 10-year US Treasury yields rose to 4.21% and 3.69%, respectively.
However, several on-chain metrics suggest that Bitcoin may soon bottom out, based on historical data. However, from a technical point of view, the price of BTC is still at risk of falling towards the $14,000-$16,000 area, according to independent analyst il Capo de Crypto.
It is more likely that the [Bitcoin] be rejected at the first resistance 20300-20600″, he said quoting the chart above, adding:
Other bitcoin analysts have talked about even lower targets like $10,000-$11,000 as this is a historical high volume range.
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