Largest Bitcoin fund sinks near 30% in crypto rout. The Grayscale Bitcoin Trust has become one of the most visible casualties of the bear market. As a result of the precipitous decline in the price of bitcoin.
Bitcoin’s depreciation of around 9 percent during the same period. Has been exceeded by the $27 billion fund (ticker: GBTC). Which has lost approximately 17 percent so far in 2022, according to Morningstar. GBTC’s price closed on Tuesday 26.5 percent. Below the value of the Bitcoin it now holds, according to Bloomberg. Extending the so-called discount to record levels for the cryptocurrency. It is according to statistics from Bloomberg.
A phenomenon that has been affecting the GBTC for several months. Has been found and is being addressed. In addition, because the trust does not permit the redemption of shares. In the same way that an exchange-traded fund does. The trust’s supply of shares cannot be issued and destroyed. As quickly as it can with an exchange-traded fund in reaction to shifts in demand. This resulted in an abrupt drop in the stock price as investors scared away. From cryptocurrencies, hence increasing the discount between the stock price and its fair value.
It was announced in October that Grayscale Investment LLC. The parent firm of GBTC, has filed a request with the Securities and Exchange Commission (SEC). To convert the stock into an exchange-traded fund (ETF). Which should result in the discount being fixed practically immediately. Officials, on the other hand. They have not yet approved the establishment of a Bitcoin fund that is backed by physical Bitcoin.
GBTC continues to crush hearts as the discount increases
Even as the discount increases, “GBTC continues to break people’s hearts,”. It is according to Brent Donnelly, president of Spectra Markets. In a research study released this week. In addition, he stated that “GBTC continues to crush hearts even as the discount increases.” According to the author, the performance of a physical exchange-traded fund (ETF). It is “essentially a binary gamble” at the moment in the financial markets. True, temptation exists. But it is alluring in the same way that value traps can be seductive.
A large increase in the number of shares in circulation has caused the price of GBTC. To trade at a discount to Bitcoin. After previously trading at a premium to the cryptocurrency for several years. However, the introduction of Bitcoin ETFs in Canada. As well as the introduction of the first derivatives-backed Bitcoin ETFs in the United States. Has eroded the competitive advantage. That GBTC had previously enjoyed in the cryptocurrency market.
GBTC shares were purchased back from the open market by Grayscale’s parent firm. Digital Currency Group, in an attempt to rectify the problem.
Consider that the price disparity seen by GBTC and Bitcoin has been substantially worse. Than that experienced by the ProShares Bitcoin Strategy ETF (BITO). Which is vulnerable to tracking errors since it invests in futures contracts.
But the cryptocurrency market struggled on Tuesday as Bitcoin gained 1.6 percent in value. While BITO and GBTC lost 3.3 and 6.4 percent, respectively. The cryptocurrency market continued to struggle on Tuesday. With Bitcoin increasing in value by 1.6 percent. And the cryptocurrency market losing ground.