Grayscale Investments CEO Michael Sonnenshein in a statement on April 23, where he said: “Grayscale is committed to converting GBTC to an ETF once the US approves such structure.”
April 24, 2021 / 02:45 PM IST
Bitcoin’s downward spiral continued – widening the gap between share price and underlying value of its Bitcoin holdings by close to -19 percent till closing on April 22 (Image Source: Reuters)
Investors in Grayscale Bitcoin Trust are feeling the heat as the fund’s shares plummeted after Bitcoin slumped from its record high.
The $35 billion fund Grayscale Bitcoin Trust is trading at ‘record discount’ compared to the digital assets it holds as of April 23, as cryptocurrency Bitcoin tumbled from its record highs, Bloomberg reported.
The fund lost nearly a fifth of its value since last Friday (April 16) as Bitcoin’s downward spiral continued – widening the gap between share price and underlying value of its Bitcoin holdings by close to negative 19 percent till closing on April 22, the report noted.
Another cause of worry for investors is that the structure of the trust does not allow for redemptions like in traditional exchange-traded funds (ETFs) and so they must find buyers in the secondary market which is expected to exacerbate the discount with the price of Bitcoin falling, it noted.
In the long term, the trust is also facing competition from Canada, which has approved Bitcoin ETFs, while the United States is considering applications for the same.
As such Grayscale has resorted to buying back shares to bridge the growing discount and told investors in early April it is “100 percent committed” to converting the company into an ETF once the US Securities and Exchange Commission approves the structure, the report said.
This was also reiterated by Grayscale CEO Michael Sonnenshein in a statement on April 23, where he said: “Grayscale is committed to converting GBTC to an ETF, and we have heard from investors with long-term horizons who are purchasing GBTC right now because they view it as a buying opportunity.”
Investors are, however, unlikely to be pleased as their input in the trust came during the height of ‘Bitcoin mania’, the report added.