{"id":245491,"date":"2021-05-08T23:24:52","date_gmt":"2021-05-08T20:24:52","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/gbtc-discount-presents-a-unique-challenge-for-grayscale-and-investors\/"},"modified":"2021-05-08T23:24:52","modified_gmt":"2021-05-08T20:24:52","slug":"gbtc-discount-presents-a-unique-challenge-for-grayscale-and-investors","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/gbtc-discount-presents-a-unique-challenge-for-grayscale-and-investors\/","title":{"rendered":"# GBTC discount presents a unique challenge for Grayscale and investors"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3dcb1235dc8\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3dcb1235dc8\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/gbtc-discount-presents-a-unique-challenge-for-grayscale-and-investors\/#Can_DCG_save_GBTC\" >Can DCG save GBTC?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/gbtc-discount-presents-a-unique-challenge-for-grayscale-and-investors\/#Looking_forward\" >Looking forward<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># GBTC discount presents a unique challenge for Grayscale and investors <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>Since 2013 the Grayscale Bitcoin Trust Fund (GBTC) has offered its investors exposure to Bitcoin (BTC) through a publicly quoted private instrument. However, the trust&#8217;s convertibility and liquidity vastly differ from an Exchange Traded Fund (ETF).<\/p>\n<p>Trusts are structured as companies, at least in regulatory form, and are &#8216;closed-end funds&#8217; which can initially only be sold to accredited investors. This means the number of available shares is limited, and retail traders can only access them via secondary markets. Furthermore, a GBTC share cannot be redeemed for the underlying BTC position. <\/p>\n<p>Historically, GBTC used to trade above the equivalent BTC held by the fund, which was caused by the retail crowd&#8217;s excess demand. The common practice for institutional clients was to buy shares directly from Grayscale at par and sell at a profit after the six-month lock-up period.<\/p>\n<p>During most of 2020, GBTC shares traded at a premium to its Net Asset Value (NAV), which varied from 5% to 40%. However, this situation drastically changed in March 2021. The <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roval of two Bitcoin ETFs in Canada heavily contributed to extinguishing the GBTC premium. <\/p>\n<p>ETF funds are less risky and cheaper compared to trusts. Moreover, there is no lock-up period, and retail investors can attain direct access to buy shares at par. Therefore, the emergence of a better Bitcoin investment vehicle seized much of allure that GBTC once possessed.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Can_DCG_save_GBTC\"><\/span>Can DCG save GBTC?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/c8082b4b-de92-4a6e-a718-927be9f56d98.png\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\"><em>Grayscale GBTC premium vs. net assets value. Source: Ycharts<\/em><\/figcaption><\/figure>\n<p>In late February, the GBTC premium entered adverse terrain, and holders began desperately flipping their positions to avoid getting stuck in an expensive and non-redeemable instrument. The situation deteriorated up to an 18% discount despite BTC price reaching an all-time high in mid-March.<\/p>\n<p>On March 10, Digital Currency Group (DCG), Grayscale Investments&#8217; parent company, announced a plan to purchase up to $250 million of the outstanding GBTC shares. Although the conglomerate did not specify the reason behind the move, the excessive discount certainly would have pressured their reputation.<\/p>\n<p>As the situation deteriorated, DCG announced a roadmap for turning its trust funds into a U.S. ETF, although no specific guarantees or deadlines have been informed. <\/p>\n<p>On May 3, the firm announced that it had purchased $193.5 million worth of GBTC shares by April. Moreover, DCG increased its GBTC shares repurchase potential to $750 million.<\/p>\n<p>Considering the $36.3 billion in assets under management for the GBTC trust, there&#8217;s reason to believe that buying $500 million worth of shares might not be enough to ease the price discount. <\/p>\n<p>Because of this, some important questions arise. For example, can DCG lose money by making such a trade? Who&#8217;s desperately selling, and is a conversion to an ETF being analyzed?<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Looking_forward\"><\/span>Looking forward<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As the controller of the fund administrator, DCG can buy the trust fund&#8217;s shares at market prices and withdraw the equivalent Bitcoin for redemption. Therefore, buying GBTC at a discount and selling the BTC at market prices will consistently produce a profit and there&#8217;s no risk by doing this.<\/p>\n<p>Apart from a few funds that regularly report their holdings, there&#8217;s no way to know who has been selling GBTC below net asset value. The only investors with 5% or more holdings are BlockFi and Three Arrows Capital, but none have reported reducing their position. <\/p>\n<p>Therefore, it could be potentially multiple retail sellers exiting the product at any cost, but it is impossible to know right now.<\/p>\n<p>While buying GBTC at a 10% or larger discount might seem a bargain at first, investors must remember that as of now, there&#8217;s no way of getting out of those shares apart from selling it at the market.<\/p>\n<p class=\"post-content__disclaimer\"><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>author<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/gbtc-discount-presents-a-unique-challenge-for-grayscale-and-investors\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# GBTC discount presents a unique challenge for Grayscale and investors &#8221; Since 2013 the Grayscale Bitcoin Trust Fund (GBTC) has offered its investors exposure to Bitcoin (BTC) through a publicly quoted private instrument. However, the trust&#8217;s convertibility and liquidity vastly differ from an Exchange Traded Fund (ETF). Trusts are structured as companies, at least&#8230;<\/p>\n","protected":false},"author":1,"featured_media":245492,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDUvYTY5NTEyN2QtYzgwZC00YzkyLWE1YjItMTc4YTFiOWQwNjdkLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74937,74982,74863,74860,75849,82548,76550,74939,73785],"class_list":["post-245491","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-price","tag-btc-markets","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-etf","tag-gbtc","tag-grayscale","tag-market-analysis","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/245491","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=245491"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/245491\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/245492"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=245491"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=245491"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=245491"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}