The largest Bitcoin investment vehicle, the Grayscale Bitcoin Trust (GBTC), is currently trading at the largest discount to the spot market ever.
Data from on-chain analytics resource Coinglass shows that as of June 17, GBTC shares were priced at a 34% discount to BTC/USD prices on major exchanges.
Things are worsening for investors large and small as the ongoing turmoil in DeFi spreads to the cryptocurrency market.
The latest data showed that institutions clearly failed to avoid contagion, with the already underperforming GBTC falling to new lows.
The GBTC premium has long been a misnomer, as shares in the fund are actually priced lower than bitcoin itself, which is currently hovering at an all-time low value. On June 17, GBTC was trading at a 34.2% discount to the bitcoin spot price (also known as net asset value, or NAV).
A similar decline occurred in the spot market as BTC/USD retested $20,000 twice.
GBTC Premium vs. Asset Holdings vs. BTC/USD Chart Source: Coinglass
As Grayscale seeks U.S. regulator approval to convert GBTC into a bitcoin spot price exchange-traded fund (ETF), crypto institutional products continue to be on the back foot amid heightened government attention from the Terra and Celsius disasters.
While the company remains optimistic about its outlook, GBTC’s performance has not escaped commentators who point fingers at regulators for inaccurate risk assessments.
Bitcoin spot ETFs remain illegal in the U.S. due to investor protection concerns, giving countries like Canada and Australia a first-mover advantage.
GBTC is now 66.9% below its 2017 peak, despite a 5% increase in Bitcoin’s trading price.
Must thank Mr. Gensler for protecting everyone.
— Dylan LeClair (@DylanLeClair_) June 16, 2022
Vijay Boyapati joked this week: “With no ETF approval, GBTC could have a -100% premium to NAV.”
The situation is not helped by reported liquidity issues at multiple crypto funds, which are already facing serious losses. For example, troubled Three Arrows Capital (3AC) is the largest holder of GBTC with more than 38.8 million shares.
As 3AC failed to meet margin calls this week, a stark gap emerged between GBTC and its competitors. The ProShares Bitcoin Strategy ETF (BITO), the first U.S.-approved Bitcoin futures-based ETF, has even added BTC to its assets under management in recent days.
Arthur Hayes, the former head of derivatives giant BitMEX, believes that some of the most well-known institutions in the cryptocurrency investment field are facing a "Styx" moment.
In his latest blog post on June 17, Hayes delivered a fresh blow to the fate of troubled projects Celsius, Terra, and others.
He predicts: "When this group of companies is forced to spit out any assets that are not locked in some long-term income strategy, watch out for what follows."
“There will be more indiscriminate sales of all liquid assets on the lending books so that these lending companies can return assets to retail savers.”
Previously, Hayes had predicted a floor price of $1,000 for Ethereum and $25,000 for Bitcoin, but admitted that the reality was far worse.
He added that the upcoming Fourth of July holiday weekend should provide ideal conditions for a macro bottom, especially as the second quarter draws to a close.
"June 30 to July 5 will be a wild ride down," he continued in the blog post.
“My predictions of a $25,000-$27,000 bottom for Bitcoin and $1,700-$1,800 for Ethereum have been shattered. How low can we go? I believe we will find out in this fateful weekend.”
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