The Grayscale Bitcoin Trust (GBTC) has made a name for itself in the public markets, not only as the first-ever publicly traded trust backed by a cryptocurrency, but also as the largest bitcoin trust in the world. However, Grayscale has not had an easy time of late as it has been trading at a discount. This discount has continued to widen into 2022, reaching a new all-time high, offering unique opportunities.
GBTC discount reaches 36.2%
Grayscale Bitcoin Trust (GBTC) saw its discount to its NAV decline steadily through the first two quarters of 2022, but that changed by the end of the third quarter. September has historically been a bearish month for crypto markets, and GBTC has also felt the heat.
Last week, GBTC saw a jump in its discount to NAV, hitting a new low of 36.2%. This means the trust is trading at an implied BTC price of $12,500, much lower than spot prices for the digital asset, which is trading above $20,000 at the time of writing.
This presents a unique opportunity for investors to gain exposure to digital assets at a lower-than-spot price range, but it also raises the question of why Wall Street isn’t diving into this. Arcane Research speculates that there could be two reasons for this. Either Wall Street investors are overlooking the opportunities the trust currently offers, or they don’t currently believe in long-term exposure to Bitcoin.
GBTC rebate deepens | Source: Arcane Research
However, if the Fed cuts interest rates and the dollar starts to lose some of the strength it has gathered over the past few months, then Bitcoin could see a notable price rally. This in turn would lead to a narrowing of the GBTC discount, which would result in gains for investors.
Charge fees in bitcoin
GBTC has remained a closed trust throughout its existence and Grayscale continues to charge its 2% annual management fee. Since the SEC rejected Grayscale’s offer to convert the trust into an ETF, the market expects the trust to remain closed for the next three decades, hence the big discount.
BTC back in the green | Source: BTCUSD on TradingView.com
If this is the case and GBTC remains closed until 2045, then Grayscale would have accumulated hundreds of thousands of bitcoins in fees during that time. To be precise, the trust would receive 235,000 BTC from its 2% management fee.
However, this is subject to the SEC granting approval for the trust to be converted into an ETF. Grayscale has already taken the regulator to court for rejecting their ETF application. If approved, Grayscale would essentially have the first spot Bitcoin ETF in the United States.
Featured image by Bitcoinik, charts by Arcane Research and TradingView.com
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