The difference between the shares of Grayscale Bitcoin Trust (GBTC) and the underlying bitcoin held by the fund has grown, reaching a record of 26.5% on Wednesday.
The favored method for institutional investors to invest in cryptocurrencies without having to buy bitcoin directly has been GBTC, however, the shares have recently traded at a significant discount as the market for the product has dwindled.
The premium turned into a discount in February of last year, and the discount has been gradually widening ever since for a variety of reasons, including the introduction of spot-based exchange-traded funds (ETFs) in Canada, which gave investors looking to purchase bitcoin through stocks market
Investor mistrust about Grayscale’s plan to change the fund into a spot-based ETF may potentially be the cause of the ongoing discount. Analysts disagree as to when a conversion will occur, and in the interim, investors are being charged fees.
A spot bitcoin ETF has not received approval from the US Securities and Exchange Commission.
It should continue to trade at a significant discount to represent that illiquidity, according to Dave Nadig, director of research and chief investment officer at ETFTrends.com. ” Bitcoin will never be able to leave GBTC”, according to Nadig.
The conflict between Grayscale and Bitcoin
A few recently introduced exchange-traded funds (ETFs) for Bitcoin futures, such ProShares Bitcoin Strategy ETF (BITO), have also received harsh criticism.
Nevertheless, the asset gives buyers cheaper access to the top cryptocurrency without a lockup period.
Grayscale’s Bitcoin instrument has underperformed, but the company has a strategy to turn the GBTC into a spot Bitcoin ETF.
The company’s proposal for a Bitcoin ETF, nevertheless, was already postponed by the Securities and Exchange Commission (SEC) last month.
Grayscale’s ability to complete the conversion is improbable given Gary Gensler, chair of the Commissionstrict,’s stance on investment products backed by actual Bitcoin.
A further choice for Grayscale to narrow the discrepancy between the market price of GBTC and the intrinsic worth of Bitcoin, according to James Seyffart, a Bloomberg Intelligence ETF analyst, maybe to reduce fees and provide a redemption program.
He also mentioned the possibility of permanently liquidating the fund and paying investors their money back as a drastic measure.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2022/10/24/the-conflict-between-grayscale-and-bitcoin-the-downfall-of-bitcoin/