The world’s biggest Bitcoin fund, Grayscale Bitcoin Trust (GBTC), closed at the record discount lows on January 18.
The discount, or the percentage by which GBTC share price is lower than the price of Trust’s underlying Bitcoin, dropped down by 28.29% according to investment research provider YCharts.
The number marks the highest GBTC discount in years.
Grayscale Bitcoin Trust has turned into discount mode on February 2021. Since then, the largest Bitcoin fund has operated without generating premiums, but the discount level rarely fello below 20%.
Despite the ongoing down-trend of the underlying crypto bitcoin, there several other reasons why Grayscale’s Bitcoin Trust in not bringing profit for its investors.
First of all, the demand for GBTC is decreasing, opposite to the growing interest in alternative investment vehicles that also provide with an indirect exposure to bitcoin.
One of such options is exchange-traded funds (ETFs), which offer cheaper and more flexible services compared to Grayscale’s Bitcoin Trust.
For example, the annual management fee at GBTC is 2%, while ETFs roughly charge 1%. Apart fro that, GBTC has a complicated structure and fixed number of shares, that only can be redeemed after six months, but not whenever the investor requires.
The world’s first bitcoin ETF went live in Canada last year. The United States Securities and Exchange Commission (SEC) has not yet confirmed bitcoin ETFs, despite the fact that numerous wealth management companies have filed ETF applications with the SEC, including Grayscale itself. The largest bitcoin trust applied for SEC to convert GBTC into exchange-traded fund in August 2021.
Launched back in 2013, Grayscale Bitcoin Trust became one of the most popular BTC investment vehicles for institutional investors, which offered them the ability to invest in dominant crypto without actually holding it.
Grayscale Bitcoin Trust currently operates over $27 billion worth of Assets Under Management (AUM).
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