GBTC Premium Down 34%, Largest Discount Ever on Spot Market

UTC by Kofi Ansah · 3 min read
GBTC Premium Down 34%, Largest Discount Ever on Spot Market
Photo: Depositphotos

Although Grayscale remains upbeat about the future, GBTC’s performance has been the subject of criticism by market experts, channeling the blame at regulators for what they see as an inaccurate risk assessment.

The Grayscale Bitcoin Trust (GBTC), the largest Bitcoin investment vehicle, is now down 34% against Bitcoin (BTC)/USD on major exchanges as of June 17. The GBTC premium, according to data from on-chain analytics resource Coinglass, is now trading at its lowest value in history.

The latest numbers, according to market experts, demonstrate that institutions have decisively failed to avoid the contagion amid the continued turbulence in the decentralized finance (DeFi) sector, which has spilled over to the crypto market, with conditions deteriorating for investors both big and small.

On June 17, the GBTC premium traded at 34.2% cheaper than the Bitcoin spot price, also known as net asset value, or NAV. The latest development has also been partly linked to BTC/USD retesting the $20,000 mark twice, a severe fall that accompanied a similar dip on spot markets.

Grayscale still seeks clearance from the United States regulators for permission to convert GBTC to a Bitcoin spot price exchange-traded fund (ETF), as conditions for cryptocurrency institutional products remain hostile, owing to the increased government scrutiny following the Terra and Celsius meltdowns.

Although Grayscale remains upbeat about the future, GBTC’s performance has been the subject of criticism by market experts, channeling the blame at regulators for what they see as an inaccurate risk assessment.

Liquidity issues at many crypto funds with exposure to those already experiencing heavy losses have also been an additional problem for the current situation. A clear example is the case of embattled Three Arrows Capital, also known as 3AC, which is the largest GBTC holder with over 38.8 million shares.

A marked gap is opening between GBTC and its competition as a result of 3AC reportedly failing to meet margin call requirements this week. The ProShares Bitcoin Strategy ETF (BITO), has even added BTC to its assets under management in recent days.

Due to investor protection concerns, Bitcoin spot ETFs remain prohibited in the United States, which allowed countries such as Canada and Australia to gain a first-mover advantage. The first US bitcoin (BTC) exchange-traded fund (ETF), “BITO”, hit the U.S market on October 19, 2021, and attracted over $1 billion in assets in the first few days.

According to some market experts, the future of GBTC now depends on the acceptance of an ETF.  “Without ETF approval GBTC may go to -100% premium to NAV,” economist and former Google engineer, Vijay Boyapati said this week.

After the recent event, Arthur Hayes, the former CEO of derivatives firm BitMEX, chimed in with some thoughts, claiming that some of the biggest names in crypto institutional investing are now facing a “River Styx” moment.

“As this cohort of firms is forced to puke out any asset that is not locked in some long-term yield strategy, look out below. More indiscriminate selling of all liquid assets on their loan books will occur so these lending firms may return assets to their retail depositors,” he stated in his latest blog post on June 17.

Bitcoin News, Cryptocurrency news, Funds & ETFs, Market News, News
Kofi Ansah
Author Kofi Ansah

Crypto fanatic, writer and researcher. Thinks that Blockchain is second to a digital camera on the list of greatest inventions.

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