Shares of Grayscale Bitcoin Trust (GBTC), the world’s largest bitcoin fund, reached a record-high discount rate of above 47% relative to the price of Bitcoin (BTC). Bearish sentiment surrounding the trust deepened over fears that crypto trading firm Genesis Global Trading, with the same owner, could file for bankruptcy.
GBTC is a way for investors to gain exposure to Bitcoin through a traditional investment vehicle. According to TradeBlock, GBTC was trading at a discount rate of 47.3%.
“The fact that Grayscale’s Bitcoin Trust is now trading at nearly 50% discount is just awful for holders of GBTC. It really highlights the vast differences in structure quality between different investment vehicles,” said Bradley Duke, ETC Group CEO.
Over the last few weeks, the bearish stance surrounding the trust deepened as a result of fears that crypto trading firm Genesis Global Trading, which is also owned by Digital Currency Group (DCG), Grayscale’s parent company, could file for bankruptcy.
After the crypto exchange FTX crash, Genesis Global Trading announced it would halt customer withdrawals from its lending unit, Genesis Global Capital. Amid bankruptcy speculation, Genesis said in a note to clients that the lending unit’s withdrawal freeze is likely to be a matter of weeks.
The crypto community speculated on Twitter that a cascade of liquidity issues at DCG subsidiaries could lead to the liquidation of GBTC, with a massive amount of dumping of Bitcoin on the open market. Also, some complained that Grayscale hadn’t transparently proven its GBTC fund reserves.
GBTC shares haven’t traded at a premium to Bitcoin since March 2021. Before that date, the trust benefited from strong institutional demand and traded at a double-digit premium to its net asset value.
Earlier, hedge fund Fir Tree said on Dec. 6 it is suing Grayscale to obtain details about GBTC to investigate potential mismanagement and conflicts of interest. The firm also claimed it wants Grayscale to resume redemptions and cut its 2% fees for the trust.