Institutional crypto investment vehicles have fallen out of favor lately. One of the most iconic, the Grayscale Bitcoin Trust (GBTC), has been losing momentum, posting a record discount since hitting its peak in December 2020. Is the bear market to blame? Perhaps, but its decline is not new.
The Grayscale Bitcoin Trust is no longer popular
The pioneer of institutional bitcoin investing is not in the best of shape. The share of its flagship product, the GBTC, which was trading at the top of its form at โฌ56, is now only worth $11.73.
If he currently still holds 3.12% of the total Bitcoin supply, i.e. more than 654,000 BTCthe daily trading volume of its Bitcoin fund continues to decline, indicating a clear lack of interest from investors. However, with a record discount of 35.18%, according to the latest data, compared to the value of its underlying asset, GBTC September 2022 release is quite a bargain. But as with bitcoin, which is wildly coveted at $50,000, and almost no one is buying at less than $20,000, the Grayscale Bitcoin Trust no longer attracts many people. And this is not only the consequence of this famous crypto winter in which the ecosystem has been immersed for almost a year.
A decline that does not date from today
As a reminder, at the top of the hypewhile the market hovered around 3 trillion in capitalization, Grayscale held some 60 billion dollars of assets under management, reduced today to approximately 18 billion. But its decline had already begun, as we noted in March 2021.
The reasons : long-toothed rivals who came to compete with him in the field where he reigned supreme for many years. Last to date and not least, the giant BlackRock which has just announced that it is positioning itself in this niche temporarily at half mast (if BlackRock is committed, it means that the segment is promising) with the launch of a Bitcoin trust. But also the introduction of exchange products which offered less costly solutions of exposure to BTC. Too bad if it was only derivatives, and not ETFs backed by โphysicalโ bitcoins. The public flocked to this new offer which has since also experienced the horrors of the bear market.
A double โkiss hardโ effect: the fall of cryptos and the fact that investors are increasingly looking for a stock market product that can expose them directly to this new asset class.
Does the GBTC’s record discount herald a further drop in the price of Bitcoin?
A boon for Grayscale who thought, in particular thanks to its treasure in BTC, to have all the assets in hand to bend the American financial policeman (the SEC) and finally obtain the approval to issue a Bitcoin ETF in cash. We know what happened next, the stubborn refusal of the regulatory body and the ongoing debates before the courts.
Investors therefore remain stuck with their GBTC shares at a discount, rushing to sell them as soon as their lock-in period ends..
As much in the time of its splendour, the upward or downward fluctuations of the GBTC were an indicator of the future orientations of the bitcoin curve, as much today, they appear as less significant. Its influence on the spot market after the emergence of a palette of ETFs and BTC funds has become negligible. Be that as it may, investment products in cryptos of all categories have been experiencing, unsurprisingly, low activity for weeks, in tune with a bear market that is settling in for a long time. As for knowing, if the worst is behind, one cannot swear it.
Bear market? Certainly. Good time to start in cryptos? Certainly. Also register without delay on the FTX platform and benefit from a lifetime reduction on your trading fees (commercial link).
