How is it possible that GBTC can trade at such a huge discount to NAV? At the current discount of 49%, that prices BTC at about $8.4k. Isn't that a bargain?
Grayscale's GBTC's beating this year very likely to persist
Grayscale launched its flagship product, GBTC, in 2013 for institutional investors looking to gain exposure to bitcoin. As of Dec. 20, it controlled about 3.2% of bitcoin's circulating supply, with over 632,000 bitcoin worth around $10.7 billion.
back in 2017-2018, GBTC was trading at a large premium to NAV. So what happened?
Grayscale's Bitcoin Trust issues common units of fractional shares which represent ownership in the Trust. The trust issues shares to accredited and authorized investors from time to time, with no set ongoing redemption program, in exchange for bitcoins (which must be held for 6 months). Share issuance is issued in blocks of 100 shares per basket. [TheBlock]
Redemptions ceased since the fund attempted to convert to a spot bitcoin ETF; before this, investors had to wait six months before selling their shares on the secondary market.
The lack of a redemption function means that since 2014 there has been a disparity between GBTC's trading price and its net asset value, known then as the premium. This premium flipped to a discount in early 2021. Therefore, the market price of GBTC shares is over 47% lower than the value of the bitcoin in the fund or its net asset value (NAV).
Grayscale tries to blame the SEC for rejecting several applications to convert the existing fund into an ETF. That may suck, I understand, but how is that related to hijacking investor assets for years?
Grayscale's parent firm, Digital Currency Group (DCG), also owns Genesis Capital - that also owns about 10% of GBTC. But DCG makes an eye-watering $210m per annum, even during this crypto winter, from its hapless locked-in investors.
Therefore maintaining the fund is more profitable for the asset manager in the long run.
Not great for the investors. This isn't even a "crypto scam" at heart, but the creation of a poorly-structured trust fund.
Note also that being "accredited and authorized investors" does nothing to protect you from losing money.
And those "accredited investors" are paying "management fees" for nothing - also, looks like 2% pa but of the NAV, not the share price. Smart investors.
But the funny part now is that even their parent corp that needs the money can't get it. So the discount is the fear factor of being locked in. Glad to see some people considering suing GS.
yeah, it's like half-price BTC, but if and when one can actually sell.
ETHE too
https://ycharts.com/companies/ETHE/discount_or_premium_to_nav
raking 2% pa for doing nothing is easy money, but not allowing redemptions is like being mugged by pickpockets... every day.