Grayscale discount continues to recover, good news for Bitcoin?
Grayscale Bitcoin Trust (GBTC), the largest Bitcoin trust in the world, had a rocky end to the year 2022 after its sister company Genesis Trading filed for bankruptcy. However, it has seen a better start to 2023 as it continues to close the gap on its unusually deep discount in December 2022. As GBTC moves back towards parity with BTC spot market prices, could this be good news or bad news for Bitcoin?
Gray tone discount for NAV Shrinks
By December 2022, the Grayscale discount to NAV had risen to almost 50%, registering a new all-time high in the process. This meant that the trust was trading at approximately 50% lower price compared to the price of BTC on the spot market. It would then carry this steep discount into January 2023, but the tide began to turn as the crypto market saw a recovery.
Slowly but steadily, the GBTC discount has shrunk during the first quarter of 2022. It has since recovered by over 15% over the three-month period, pulling the discount back into 30% territory, a new five-month low.
On April 5, 2023, the GBTC discount was 36.9%, although this is not the lowest point so far for 2023. The lowest discount so far for 2023 was reached on March 8, when it fell to 34.11%. Still, it’s still a long way off the 2022 highs.
GBTC discount falls to 36.9% | Source: YCharts
Similarly, the discount to NAV of Grayscale Ethereum Trust (ETHE) has been recovering in 2023. ETHE ended 2022 with a record discount of 59.62%, but by April 5th it has fallen to 50.92% , with the lowest discount for the year so far of 46.88% recorded on March 9, 2023.
GBTC recovery good for Bitcoin?
The Bitcoin price suffered from the uncertainty surrounding the Grayscale Bitcoin Trust last year because the trust currently has over 600,000 BTC that it holds with the Coinbase Custody service. Most of the uncertainty was around whether the contagion from Genesis Trading’s bankruptcy filing would spread to the trust.
However, GBTC’s team had pacified investors when it revealed that the trust was being run independently and so far the trust has been able to continue operations. The closing of the discount gap also shows that investor confidence is returning and GBTC is recovering.
BTC falls below $28,000 | Source: BTCUSD on TradingView.com
One thing that continues to hold back confidence, however, is the lawsuit with the Securities and Exchanges Commission (SEC) after the regulator denied the trust’s application to turn it into a Bitcoin Spot ETF for the second time. The lawsuit is still ongoing, but if Grayscale were to prevail, it would be an important victory for the space, and BTC’s price would more likely than not react positively to such news, as it would be the first BTC spot ETF in the US.
Currently, BTC is still struggling to hold $28,000 and the bears have pushed the price back to $27,900 again. However, interest remains high as the Bitcoin Fear & Greed Index shows that investors are still very greedy, pointing to buying pressure for the digital asset.
