Grayscale Bitcoin Trust (GBTC) Discount Declines Below 10% Since July 2021
Grayscale Bitcoin Trust (GBTC) discount has declined to 9.77% relative to the net asset value (NAV) since July 2021. The discount in the GBTC price fell below 10%, coinciding with the sale by Cathie Wood’s Ark Invest of shares estimated at $2 million.
GBTC stock has sold at a discount to the net value of the underlying assets owing to the inability of Grayscale Investments to convert the trust to a spot Bitcoin exchange-traded fund (ETF). The hindrance has been the repeated dismissal of its applications submitted to the US Securities and Exchange Commission (SEC).
The Gary Gensler-chaired SEC has often indicated that spot Bitcoin trust is vulnerable to market price manipulation. However, the recent court victory of Grayscale Investments over the SEC directing the securities regulator to review the GBTC application triggered the share price discount decline.
GBTC Trading at Lowest Discount
The trading discount relative to the NAV involves a metric indicating how low the market price of GBTC shares is relative to the Bitcoin value it represents. A review of the metric shows a continued decline to yesterday’s 9.77%, the lowest ever realized since July 2021, as per YCharts data.
GBTC has traded at a discount since investors are unable to redeem shares. It restricts shareholders since they only sell such shares to other prospective buyers. A review of the GBTC price history shows that GBTC shares traded at a premium before the credit crunch witnessed in 2021.
The JPMorgan analysts linked the plunge suffered by GBTC shares into the discount territory to the move by institutional investors to sell. The sale allowed them to monetize the premium that existed then. It coincided with the unveiling of new bitcoin ETFs in Canada.
GBTC Shares Discount Shrink Amid Looming ETF Approval
The prevailing hype about looming ETF approval contributes to reducing the GBTC price discount. By market close yesterday, the GBTC shares were exchanging hands at $30.45.
GBTC price is up by over 25% in the past 30 days, a trend attributed to SEC’s decision to discard appealing court decision granting Grayscale Investments’ motion to convert the flagship GBTC fund to the long-sought spot Bitcoin ETF.
The GBTC share increase coincides with Bitcoin’s rally by 2.5% in the past date to exchange hands at $37543, according to CoinMarketCap.
The narrowing trend witnessed in GBTC shares trading at a shrinking discount began in mid-2023 in the revelation of the BlackRock leading series of applications for Bitcoin ETF applications. The trend arises from the increased optimism that the SEC would approve a dozen applications for spot Bitcoin ETF, thus allowing GBTC conversion. Such signs are evident in the SEC meeting with Grayscale and the BlackRock representative earlier this week regarding the spot Bitcoin ETF filings.
Cathie Wood Hunts for Bargain Stock
Meanwhile, Ark Invest, led by the American investor Cathie Wood, leveraged the declining discount to NAV in offloading 36168 GBTC shares valued at $1.1 million. On Wednesday, its latest trade filing disposed of the funds from the ARK Next Generation Internet fund (ARKW). The figure adds to the 32980 GBTC shares sold on Tuesday, November 21, to earn $1 million. The two-day sales earned Cathie Wood’s Ark Invest over $2 million at current GBTC prices.
The sale mirrors the move by Ark Invest to offload 139506 GBTC shares Ark Invest offloaded earlier in November at a value of $3.8 million. The sale allowed Wood to acquire 113,326 shares at Block Inc. aggregated to a value of $5.6 million across the Ark Invest funds. Market observers attributed the move as a target to leap from Block’s Cash App growth, whose quarter-three profits rose by 22% following the wild volume of Bitcoin transactions.
Wood is offloading GBTC shares, and in return, the aggressive growth investor portrayed her bargain hunting trend in acquiring shares in Zoom Video Communications (ZM), Teladoc Health (TDOC) and Recursion Pharmaceuticals (RXRX).
Editorial credit: Ascannio / Shutterstock.com
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