Grayscale Bitcoin Trust (GBTC), the world’s largest Bitcoin fund, hit new discount lows on January 18th.
As per financial analysis firm YCharts, the discount, or the proportion by which the share price of GBTC is less than the price of the trust’s underlying bitcoin, has declined by 28.29 percent.
This discount is the largest in years for the GBTC
Since February 2021, Grayscale Bitcoin Trust has been in discount mode. Although the discount level seldom dipped below 20%, the bitcoin fund has been functioning without producing premiums.
Notwithstanding bitcoin’s continuous decline, there are some additional reasons why Grayscale Bitcoin Trust has failed to make a profit for its investors.
To begin with, demand for GBTC has been declining, despite the rising interest in alternative investment vehicles that give indirect bitcoin exposure.
Exchange-traded funds (ETFs) are one such alternative since they provide cheaper and more flexible services than the Grayscale Bitcoin Trust.
The yearly management cost for GBTC, for example, is 2%, while ETFs are about 1%. To make matters worse, GBTC used a complicated structure and a limited amount of shares that could only be redeemed after six months rather than when an investor needed them.
Although multiple wealth management organizations have submitted ETF applications with the SEC, notably Grayscale, the world’s first bitcoin ETF officially started in Canada last year, the United States Securities and Exchange Commission (SEC) has yet to approve any Bitcoin ETFs. In August 2021, the bitcoin trust filed a request with the Securities and Exchange Commission (SEC) to transform GBTC into an exchange-traded fund.
Grayscale Bitcoin Trust, founded in 2013, quickly became one of the most popular BTC investment vehicles for institutional investors, allowing them to invest in the leading cryptocurrency without actually possessing it.
Grayscale Bitcoin Trust has about $27 billion in assets under management at the moment.