Grayscale Bitcoin Trust Discount Widens to All-Time Low of 30.79%

The $18.3 billion Grayscale Bitcoin Trust (GBTC), the world's largest bitcoin (BTC) fund, has seen its market discount widen to an all-time low of 30.79% this week as crypto markets suffered one of their most volatile weeks in recent times, data shows.

Each share of GTBC holds $26.46 worth of bitcoin as of Friday, according to Grayscale. But GBTC itself trades at $18.35 at writing time.

GBTC is currently one of the only ways for stock traders in the U.S. to gain exposure to the price movements of bitcoin without the need to purchase the actual cryptocurrency.

For years, the GBTC fund traded at a premium to the underlying bitcoin price, but it flipped negative in early 2021 due to several factors, including the launch of spot-based exchange-traded funds (ETF) in Canada, which provided an alternative to those looking to invest in bitcoin through a stock market vehicle.

The discount could be taken as a bearish indicator because it might mean a waning interest in bitcoin among traders. But it also is seen by some opportunistic traders as a way of scooping up bitcoin on the cheap.

Unlike for exchange-traded funds, the trust has no built-in market mechanism to keep the GBTC share price trading close to the underlying value of the bitcoin.

Last year Grayscale applied to the U.S. Securities and Exchange Commission (SEC) to convert GBTC into a spot exchange-traded fund. Many analysts are skeptical the SEC will approve the conversion anytime soon, though some traders have bought GBTC as a way of betting on the prospect of the SEC's nod; in that sense, a wider discount signals dimming optimism for such an approval.

In the meantime, investors are getting charged fees.

The recent crypto sell-off also may have contributed to a wider GBTC discount. Bitcoin fell as low as $24,000 on Thursday, before recovering to over $30,000 early Friday. The asset has lost 23% of its value in the past month amid inflation concerns and weak sentiment in broader equity markets.

Grayscale’s parent company, Digital Currency Group, is also the owner of CoinDesk, which is run as an independent subsidiary.