On Wednesday, the GBTC recorded its largest discount ever – 41% – which represented a price per share of $8.76 at the close of markets.
Price began to sag and, as of this writing, had dropped 21% in five days. The Grayscale Bitcoin Trust, the largest institutional Bitcoin fund in the world, is one of the casualties of the sudden market collapse (GBTC). On November 9, the GBTC closed at a record 41% discount, with a share price of $8.76. Since reaching a peak price of $51.47 per share on November 12, 2021, the GBTC has generally been steadily decreasing for about a year.
Being an investment trust fund with shares that are neither freely generated nor offer a redemption mechanism, GBTC has a structural issue. Due to this inefficiency, there are large price differences when compared to the fund’s actual Bitcoin holdings.
Given that an exchange-traded fund (ETF) enables the market maker to issue and redeem shares, ensuring the premium or discount is, in most cases, negligible, Grayscale has apparently been attempting to convert the GBTC to an ETF. Since submitting its application in October 2021, the company has been awaiting the Securities Exchange Commission’s (SEC) final determination.
The SEC formally rejected Grayscale’s request to transform GBTC into a spot Bitcoin ETF on June 29. Then Grayscale made the choice to initiate a lawsuit, and on October 11 it submitted the initial legal brief to contest the SEC’s decision. The current market crisis started on November 2 following reports that a leaked balance sheet from the trading company Alameda Research, founded by Sam Bankman-Fried, suggested the firm held a sizeable amount of FTX Token FTT ($3.76)., the FTX cryptocurrency exchange’s native token.
The crypto community was concerned about a big trading firm possessing so much of a single asset, and there were also worries about the connection between FTX and Alameda. Since that day, the situation has quickly become worse, resulting in a full-fledged “bank-run” of FTX customers who started taking their money out of the exchange. According to information from Nansen, stablecoin outflows on FTX totaled $451 million over the course of seven days on Nov. 7.
