Grayscale Bitcoin Trust Reduction Reaches Record 50%

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Shares of Grayscale Bitcoin Trust (GBTC) hit an all-time high discount rate against the price of bitcoin (BTC), surpassing 50% for the first time after the U.S. Securities and Exchange Commission reiterated its reasons to decline a request to convert the worlds largest bitcoin fund into an exchange-traded fund.

Crypto analysts said the rebate would likely close if the conversion goes ahead, as the buyback process available to ETF market makers would likely drive the stock back towards the underlying bitcoin price.

Grayscale Bitcoin Trust

Over the past two hours, the discount has since retreated slightly to around 48.66%.

GBTC, which is managed by Grayscale Investments, was designed as a way for investors in traditional markets to gain exposure to bitcoin, the largest cryptocurrency. The fund currently has approximately $10.7 billion in assets under management, a figure that is down 65% over the past 12 months, largely thanks to the sharp drop in crypto prices this year.

The fund is trading at a discount in part because investors, while free to sell GBTC shares in the market, have no way to redeem their holdings in exchange for bitcoin in the trust. And in the meantime, they are charged a 2% fee.

Negative sentiment surrounding confidence has swelled in recent weeks as fears surfaced that crypto trading firm Genesis Global Trading, which is owned by Grayscales parent company Digital Currency Group (DCG), could file for its balance sheet.

Grayscale says it’s business as usual, but Twitter analysts and posters have suggested that any financial ramifications for DCG could somehow, at some point, affect GBTC. (CoinDesk is an independent subsidiary of DCG.)

Pablo Jodar, crypto analyst at GenTwo, a financial services provider, said some investors don’t trust the information Grayscale discloses about how much bitcoin they hold, which contributes to selling pressure.

He also said that a recent flurry of deposit withdrawals from major crypto exchange Binance may have dampened market sentiment. The market no longer trusts intermediaries, and that’s why you see investors withdrawing money from exchanges and financial instruments like GBTC, he added.

Grayscale is currently being sued by hedge fund Fir Tree for details of GBTC to investigate possible mismanagement and conflicts of interest. The company said it wants Grayscale to resume redemptions and reduce its 2% fee for the trust.

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