07 Mar 2022

One year of discount in Grayscale’s Bitcoin Trust

The GBTC discount grows larger, and Digital Currency Group has announced a $250m buyback to combat the ever-growing discount.
Source: Skew
This week, the Grayscale Bitcoin Trust reached one year of consistent discount in its share price relative to the NAV of the fund.The discount is a result of massive inflows from late 2020, saturating the market with an abundance of GBTC shares. Through this saturation, the shares in the secondary market have experienced sustained selling pressure from investors who originally intended to play the Grayscale arbitrage of buying in-kind and selling shares at a premium.Grayscale has now responded to the discount by announcing a $250 million buyback of Grayscale Trust shares.This could have a short-term impact on the GBTC shares, leading the discount to possibly narrow. However, it’s rather unlikely that a premium will ever emerge in GBTC with 2021’s launch of several ETFs and ETPs who are in direct competition with GBTC, with the added feature of shares tending to trade near NAV.Grayscale is in the process of trying to convert the GBTC trust into an ETF. This would resolve the discount issue, leading the shares to trade at NAV due to an active redemption program. Nevertheless, such an approval seems unlikely, given all previous rejections. The market does not seem convinced either, based on the 29% discount of GBTC’s share price compared to its NAV.
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