Who wouldn’t want to buy a dollar for 60 cents? The same answer would hold if the currency in question were euros, yen or even bitcoin. But, in the case of one of the largest holders of the cryptocurrency, there is a catch.
Grayscale Bitcoin Trust, under the ticker GBTC, is a publicly traded entity with nearly $11 billion in assets under management, all in bitcoin. It is a way for anyone with a brokerage account to get exposure to the cryptocurrency without the complexity of direct ownership. GBTC held about 635,000 bitcoin as of the end of September, according to regulatory filings, or more than 3% of the circulating supply, according to CoinMarketCap figures.
In contrast to today’s 40%-plus share price discount to the dollar price of the trust’s bitcoin per share, it long fetched a premium, due in part to its simplicity for individual investors. Sophisticated traders loved it too, buying newly created shares and then later selling them at a premium—a kind of arbitrage. That helped the fund grow so large, but the shares slipped to a discount in early 2021. Unfortunately for current owners, the process doesn’t currently work in reverse.
GBTC’s sponsor is Grayscale Investments LLC, which is owned by Digital Currency Group. DCG has previously been authorized to buy shares of GBTC, which is one way to help narrow the discount. As of the end of September, DCG and its companies owned close to 10% of GBTC shares, according to filings. Under securities rules that apply to Grayscale products such as GBTC, affiliates are unable to sell more than 1% of shares outstanding every three months, according to Craig Salm, chief legal officer at Grayscale. In this case, DCG would be an affiliate.
Some GBTC shareholders might root for a
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