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On Dec. 19, 2022 the exposure price of GBTC witnessed a yet unseen low. Almost 50% discount to NAV has been the new record in past two-days.
GBTC Discount
The data sourced from Ycharts states that the discount to NAV reached 48% at some point. Such a strong decrease of a fund’s shares might be seen as an investment opportunity for those who are willing to make a long-term investment in BTC. However, there are some serious downsides.
This massive discount would not be possible without any serious risk concerns. As the investors tend to use arbitrage opportunities on the market moments after it occurs. However, the case of Glassnode is not the best arbitrage opportunity out there, as inflows to the funds are not recovering.
It must be noted that Arbitrage is an investment strategy in which an investor simultaneously buys and sells an asset in different markets to take advantage of a price difference and generate a profit.
According to a Bloomberg report, Grayscale is now considering a tender offer to close the discount. The investors were able to realize almost automatic gains. The Dec. 21, 2022 report states that “Grayscale Investments’ proposal to buy out certain holders of its flagship Bitcoin trust is the money manager’s latest bid to stanch losses in a fund that’s been a linchpin in the dramatic rise and fall of the cryptocurrency universe.”
Bloomberg refers to “GBTC’s biggest trade goes from hero creator to widowmaker.” For many years Grayscale Bitcoin Trust (GBTC) served as the channel through which “billions of dollars flooded into crypto to exploit a seemingly automatic arbitrage trade. Now, some of those same industry giants are collapsing into bankruptcy. And the others compete with a wave of distress sparked in part by this very trade.”
The most common, Graysacle, attracted Three Arrows Capital, which held over 5% of GBTC before the hedge fund’s collapse over the summer.
On the other hand, Grayscale Investments CEO, Michael Sonnenshein, joined Yahoo Finance Live and discussed his company’s bitcoin ETF and also weighed in on the fallout of the FTX collapse.
While, as per the Wall Street Journal, the CEO of Grayscale Investments, Michael Sonnenshein, said in a letter to investors that ” the firm would explore new options to return a portion of the GBTC‘s capital to shareholders if it fails to transform the world’s largest bitcoin fund into an exchange-traded fund. These options could include a tender offer for up to 20% of the outstanding shares of the $10.7 billion trust.”
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
