Public bitcoin-related funds have seen both of theirs share prices and assets under management plummet, in line with the chaos of digital assets.
“Investors have significantly reduced exposure to risky assets and remain risk-averse at present as inflation remains high and central banks continue to tighten,” analysts at Kaiko wrote in a Monday report.
Grayscale Bitcoin Trust GBTC,
the world’s largest bitcoin fund, has lost about 67% of its value so far this year, underperforming bitcoin, which fell about 59% over the same stretch, according to FactSet data.
Meanwhile, the fund’s shares were trading at a record 37% discount to net asset value, or its underlying bitcoin holdings. GBTC is a closed-end fund, where accredited investors can buy shares based on net asset value, and sell them in the secondary market after a six-month lock-up period.
GBTC was launched in 2013. Its shares previously traded at a premium of up to 41% over net asset value, but since February 2021 has traded at a discount. Falling crypto values since about November have been a factor in the decline in the fund’s assets under management, which decreased by almost 60% to around USD 12.2 billion per Monday from $30 billion at the beginning of the year.
The decline can also be attributed in part to increasing competition from other funds, as more bitcoin futures-backed exchange-traded funds, or ETFs, were launched in the US and other countries. Also, the US Securities and Exchange Commission rejected Grayscale’s application to convert GBTC into a spot bitcoin ETF, which would have allowed investors to redeem shares at net asset value.
Meanwhile, ProShares Bitcoin Strategy BITO,
the first bitcoin futures-based ETF in the U.S., is down 58% so far this year, according to FactSet data. Capital under management fell to $623 million on Monday from $1.2 billion at the start of the year.
“BITO, the first bitcoin-linked ETF in the US, has demonstrated its ability to closely track spot bitcoin, despite an extremely volatile period for stocks, bonds and digital assets in its first year since inception,” wrote a representative of ProShares to MarketWatch via email.
Valkyrie Bitcoin Strategy ETF BTF,
lost 58% so far this year, and the VanEck Bitcoin Strategy ETF XBTF,
fell 58% in the same period.
Spokespeople for Grayscale, Valkyrie and VanEck did not immediately respond to requests for comment.
