The world’s biggest Bitcoin fund, Grayscale Bitcoin Trust (GBTC), closed record discount lows on January 18th.
The discount, or the percentage by which the share price of GBTC is lower than the price of the trust’s underlying bitcoin, dropped by 28.29%, according to investment research provider YCharts.
The number marks the highest GBTC discount in years.
Grayscale Bitcoin Trust has been discount mode back since February 2021. The bitcoin fund has hitherto been operating without generating premiums, though the discount level rarely fell below 20%.
Despite the ongoing down-trend of bitcoin itself, there are several other reasons why Grayscale Bitcoin Trust has not brought in profit for its investors.
First of all, demand for GBTC has been decreasing, contrary to the growing interest in alternative investment vehicles that also provide indirect exposure to bitcoin.
One such option is exchange-traded funds (ETFs), which offer cheaper, more flexible services when compared with the Grayscale Bitcoin Trust.
For example, the annual management fee of GBTC is 2%, while ETFs charge roughly 1%. Further compounding upon this, GBTC operated using a complex structure, and a fixed number of shares which can only be redeemed after six months, not when a given investor requires it.
The world’s first bitcoin ETF went live in Canada last year, though the United States Securities and Exchange Commission (SEC) has not yet confirmed any bitcoin ETFs, despite the fact that numerous wealth management companies have filed ETF applications with the SEC, including Grayscale itself. The bitcoin trust launched an appeal with the SEC to convert GBTC into an 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 the dominant crypto without actually holding it.
Grayscale Bitcoin Trust currently operates over $27 billion worth of Assets Under Management (AUM).