04 Oct 2022
The opposite Grayscale arb no one is taking
The GBTC discount reached its highest mark ever last week at 36.2%, a discount implying that GBTC will remain close-ended until January 2045.
The GBTC discount to its NAV has grown further in the last week, reaching lows of 36.2%, or implied BTC prices of $12,500.The discount appears as GBTC remains a close-ended fund following the SEC’s denial of Grayscale’s ETF filing this summer. Nonetheless, within the current discount, the market is pricing in Grayscale staying close-ended until January 2045. Grayscale has been vocal about its intentions to convert the fund into an ETF and has sued SEC following the denial. While the outcome of the lawsuit is highly uncertain, steps are being taken in the US to build a clear regulatory framework covering digital assets, and Gensler has signaled support for CFTC having BTC oversight.GBTC is structured with a 2% annual management fee based on the AUM of the fund. If the fund structure remains close-ended until 2045, Grayscale will garner 235,000 BTC in management fees.There are good arguments to be made to invest in GBTC at current discounts. The fact that discounts haven’t narrowed suggests that Wall Street is either overlooking BTC opportunities or reluctant to commit to a long-term play on BTC. As sentiment improves, GBTC’s discount may narrow. In turn, GBTC may absorb some of the BTC demand and thus reduce some potential upside in BTC.