The situation is getting worse for holders of the Grayscale Bitcoin Trust, which is now trading at a record low discount price to the value of the digital assets it holds. The $35 billion funds have lost forcefully a fifth of its value since last Friday while Bitcoin tumbled from record highs.
Grayscale Bitcoin Trust Drops to Record Discount Amid Crypto Collapse
The loss in the value of the Grayscale Bitcoin Fund has helped to broaden the difference between the share price and the underlying value of the BTC holdings to roughly negative 19% as of the closing prices of Thursday.
Moreover, the investors are being squeezed into segments due to the structure of the trust, which does not allow the retrieval like most of the traditional exchange-traded funds.
In addition to this, the owners of the trust need to find purchasers in the secondary market if they desire to sell, which can aggravate the discount with the falling price of BTC.
GBTC has also faced increased competition from Canada which has approved Bitcoin ETFs, while the regulators of the United States continue to consider applications.
Stephane Ouellette, the CEO and the co-founder of FRNT Financial, said:
“There is definitely still a rotation out of these products because they are much less efficient — combined with others just taking off BTC exposure through GBTC, it definitely makes sense we’d be at a record discount”
In addition to this, Stephane said:
“GBTC has never been in a situation where one, there have been readily available alternatives that dominate and two, this is the most significant sell-off in absolute terms since the massive adoption boost we’ve seen since the fall.”
Grayscale Investments to Blunt the Widening Discount
The CEO of Grayscale Investments, Michael Sonnenshein recapitulated the comments Friday in a statement, saying:
“Grayscale is committed to converting GBTC to an ETF, and we have heard from investors with long-term horizons who are purchasing GBTC right now because they view it as a buying opportunity.”
Still, that is likely of little comfort to many of the other GBTC investors who purchased the trust at a premium during the height of the Bitcoin trend.