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Grayscale GBTC Bitcoin

Why The GBTC Discount Could Lead To A Bitcoin Sell-Off

Best Owie by Best Owie
12 months ago
in Bitcoin
Reading Time: 3 mins read

Grayscale Bitcoin Trust (GBTC) remains the largest bitcoin trust in the world with billions of dollars worth of BTC, but in the last year, the trust has had a hard time keeping up with the market. The result of this has been a large premium that has continued to widen through the bear market. Currently, the GBTC is trading at a record-high premium, which has sparked speculations of a potential BTC sell-off in the pipeline.

GBTC Nears 50% Premium

The month of November was fraught with adversity for the crypto space and this is mirrored by the GBTC premium. It shows a near-steady increase in the discount or premium to NAV which has carried on into the month of December.

On Dec. 7, the GBTC premium to NAV saw one of its largest jumps when it move from 43.61% on Dec. 6 to 47.27% on Dec. 7. This has brought the premium to new all-time highs and even though the following days did not see as large of an increase, a near 1% increase each day saw the GBTC close out last week at a premium to NAV of 48.62%.

Related Reading: Inconsistent Metrics Indicate Further Struggle For SUSHI – Colder Winter Ahead?

Now, what this means is that the price of ‘one BTC’ is trading for 48.62% lower on the GBTC than it is on the spot market. Normally, this would present as an opportunity to buy for cheap but GBTC investors are not buying any actual bitcoin, and with the issues that Grayscale’s parent company, DCG, has been facing, it has become increasingly obvious to investors that the fund may be headed for trouble.

GBTC Premium to NAV

Will This Lead To Bitcoin Sell-Off?

The GBTC currently holds more than 640,000 BTC worth around $11 billion at today’s prices. As such, the speculations about a potential collapse do not stem from concerns about Grayscale itself but about its parent DCG company.

DCG is reportedly in a $2 billion debt, most of which stems from Genesis Trading which had limited withdrawals a few weeks ago, and Eldridge. Rumors circulating on the interwebs are that DCG actually GBTC shares to collateralize its loan from Genesis, which makes up the large majority of its loan.

Grayscale Bitcoin Trust price chart from TradingView.com

GBTC share price at $8.01 | Source: Grayscale Bitcoin Trust (BTC) on TradingView.com

On a recent episode of ‘The Chopping Block’, Haseeb Qureshi, Managing Partner at Dragonfly Capital, said that the $1.1 billion promissory note to Genesis could be “callable. What this means is that if Genesis were to be liquidated or go into bankruptcy, then DCG would be required to pay the total value of the loan. The problem is that DCG does not have the needed amount to honor it if this does happen. Subsequently, DCG could look towards GBTC for a bailout if this were to happen.

Related Reading: Bitcoin Drops Below $17,000 Pre-CPI And FOMC – Scenarios To Prepare For This Week

Nevertheless, the GBTC continues to hold up through adversity. Coinbase has previously publicly stated that it holds all of GBTC’s bitcoin in its custody service, and if prices were to start recovering from here, then the premium to NAV could begin to close. 

Tags: bitcoinDCGgbtcGenesis Tradinggrayscalegrayscale bitcoin trust
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Best Owie

Best Owie

Best Owie is a seasoned managing editor with a wealth of experience currently serving as the Managing Editor at NewsBTC. Best is a highly skilled professional with a track record of producing engaging and informative content. With a keen eye for detail and a passion for accuracy, Best is committed to ensuring that each article published meets the highest standards of quality. Best has over six years of experience in the crypto industry and has overseen the creation and publishing of thousands of articles over the years. When not curating engaging content, Best can be found reading a book with a cup of hot chocolate, enjoying a Netflix series, or exploring the outdoors. Best is a true professional in every sense of the word with an exceptional dedication to producing high-quality work.

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