Grayscale Bitcoin Belief Rebate Hits Report Low

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Shares in the Grayscale Bitcoin Trust hit record lows to their net asset value yesterday, trading at a 26.5% discount. Amazingly, GBTC shares are trading below their 2017 high.

To understand how GBTC affects the Bitcoin market, you first need to understand the structure of production. The Grayscale product, first launched in 2013, allowed accredited investors and institutions to buy bitcoin exposure by accepting dollars or bitcoin for GBTC shares at net asset value with a six-month lockup period.

When GBTC shares were trading at a premium to NAV, investors were encouraged to buy more GBTC shares from Grayscale to participate in the arbitrage. This was a big driver of the 2021 bull market as Grayscale bought hundreds of thousands of bitcoin on behalf of investors.

However, when the product and its previous premium to NAV turned into a discount, investors were stuck with a product that could no longer be redeemed for Bitcoin itself, that carries a 2% annual fee and is only traded over-the-counter can. This is also what happened when all inflows into the trust were abruptly halted as no investor willingly puts in $100 knowing they will get back less, with a lock-up period.


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