In Shades of Gray We Trust: GBTC Bitcoin Hits Biggest Discount Ever

Grayscale Bitcoin Trust (GBTC) has made a name for itself in the public markets as not only the first ever publicly traded trust underwritten by a cryptocurrency, but it is also the largest bitcoin trust in the world. However, Grayscale has not had it easy lately, as it had been trading at a discount. This discount has continued to expand through 2022 and has reached a new all-time high, offering unique opportunities.

GBTC discount reaches 36.2%

Grayscale Bitcoin Trust (GBTC) had seen a steady decline in its discount to NAV in the first two quarters of 2022, but that changed as the third quarter drew to a close. September has been a historically bearish month for the crypto markets, and GBTC felt the heat as well.

Last week, GBTC saw a jump in its discount to NAV and hit a new low of 36.2%. This means the trust is trading at an implied BTC price of $12,500, much lower than spot prices for the digital asset, which remain above $20,000 at the time of writing.

This presents a unique opportunity for investors to gain exposure to the digital asset at a price below the spot price range, but it also begs the question of why Wall Street isn’t dipping its toes into this. Arcane Research speculates that there could be two reasons for this. Either Wall Street investors are overlooking the opportunities that the trust presents at this time, or they don’t believe in having any long-term exposure to bitcoin at this time.

GBTC discount deepens | Source: Arcane Research

However, if the Fed ends up cutting interest rates and the dollar begins to lose some of the strength it had gained over the past couple of months, bitcoin could see a notable rebound in price. This in turn will lead to a narrowing of the GBTC discount, leading to profits for investors.

Withdrawal of fees in Bitcoin

GBTC has remained a closed trust for its lifetime and Grayscale continues to collect its 2% annual management fee. Since the SEC had rejected Grayscale’s bid to turn the trust into an ETF, the market expects the trust to remain closed for the next three decades, hence the big discount.

BTC back in the green | Source: BTCUSD on TradingView.com

If this is the case and GBTC remains closed until 2045, Grayscale would have collected hundreds of thousands of Bitcoin in fees during this time. To be precise, the trust will see 235,000 BTC from the 2% management fee.

However, this is dependent on whether the SEC gives approval for the trust to be converted into an ETF. Grayscale has already taken the regulator to court over the rejection of the ETF file. If approved, Grayscale would essentially have the first Spot Bitcoin ETF in the US.

Featured image from Bitcoinik, charts from Arcane Research and TradingView.com

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