Bitcoin Trust’s grayscale plummets

Institutional cryptocurrency investment vehicles have fallen out of favor recently. One of the most iconic, the Grayscale Bitcoin Trust (GBTC), has been in decline, recording an all-time low since peaking in December 2020. Is the bear market to blame? Perhaps, but its decline is not new.

The Grayscale Bitcoin Trust is no longer popular.

The pioneer of institutional bitcoin investing is not at its best. The share of its flagship product, GBTC, which was trading at its peak at €56, is now worth just $11.73.

Although it currently continues to hold 3.12% of the total supply of Bitcoin, or more than 654,000 BTCThe daily trading volume of its Bitcoin fund has been steadily declining, indicating a clear lack of investor interest. However, with a record discount of 35.18According to the latest data, the September 2022 version of GBTC is a good deal compared to the value of its underlying asset. But just as with bitcoin, which has become so coveted at $50,000, and almost no one buys it at less than $20,000, the Grayscale Bitcoin Trust no longer appeals to many people. And this is not only a consequence of the famous cryptowinter in which the ecosystem has been immersed for almost a year now.

A decline that is not new

As a reminder, at the peak of the hypeWhen the market was hovering around 3 billion, Grayscale held. about $60 billion in assets under management, now reduced to 18 billion. But its decline had already begun, as we noted in March 2021.

The reasons : long-toothed rivals who came to compete with him on the ground where he had reigned for many years.. Finally, the giant BlackRock has just announced that it is positioning itself in this temporarily dormant niche (if BlackRock participates it is because the segment is promising) with the launch of a Bitcoin trust. But it is also the introduction of exchange-based products that offered cheaper exposure solutions. to BTC. So much the worse if they were only derivatives, and not ETFs backed by “physical” bitcoins. The public flocked to this new offering, which has since been hit by the bear market.

A double “hard kiss” effect: the fall of cryptocurrencies and the fact that investors are increasingly looking for an exchange-traded product that exposes them directly to this new asset class.

Does GBTC’s record GBTC discount herald a new Bitcoin price drop?

A godsend for Grayscale, which thought that, thanks to its BTC hoard, it had all the assets in hand to bend the US financial regulator (the SEC) and finally get approval to issue a cash Bitcoin ETF. We already know what happened next, the stubborn refusal of the regulator and the debates that continue in the courts.

So investors hold on to their GBTC shares at a discount and rush to sell them as soon as their lockup period ends.

So much for the period of its splendor, the up and down fluctuations of GBTC were an indicator of the future direction of the bitcoin curve, today they seem to be less significant. Its influence on the spot market following the emergence of a number of BTC ETFs and funds has become negligible. In any case, cryptocurrency investment products of all stripes have seen little activity for weeks, in line with a consolidating bear market. As to whether the worst is over, we can’t swear to it.

Bear market? Definitely. Good time to get started in cryptocurrencies? Definitely. So sign up now at the FTX platform and receive a lifetime discount on your trade rates (trade link).