The issues surrounding the Grayscale GBTC trust have been underscored by the recent reports of its record discount.
Grayscale Investments, a leader in digital currency asset management, is reportedly facing issues with its largest product, the Grayscale Bitcoin Trust (GBTC), as investors bewail emerging concerns echoed by the trust’s recent trade position, among other issues.
Grayscale’s GBTC’s Growing Issues
As previously reported by The Crypto Basic, the Grayscale Bitcoin Trust premium rate plummeted to a record low of -47.8 yesterday. This means that the trust was trading at a massive discount, a crucial indicator of a loss of investor confidence in the Grayscale financial products. A Bloomberg report disclosed that this trend suggests a broader wave of issues investors are having with the crypto market.
According to Bloomberg, the recent bearish trend surrounding the trust is unlikely to see a reversal anytime soon due to prevailing market conditions and the growing concerns with Grayscale’s parent company Digital Currency Group.
The lending arm of Genesis Global Capital, a subsidiary of Digital Currency Group, revealed last month that it would be suspending withdrawals due to issues faced in the wake of the FTX collapse. Although Grayscale assured clients that it is not affected by Genesis’ recent crisis, concerns are brewing. This has contributed to its products’ recent underperformance.
GBTC’s premium rate is currently negative 48.62% at the reporting time, indicating further declines from yesterday’s lows. The trust’s growing discounted rate is a bearish indicator of a more rapid selloff than bitcoin itself, as investor dread deepens in the wake of growing concerns.
GBTC has declined by 75% this year, whereas BTC has only shed 64% of its value. The trust’s current discounted rate suggests that its investors are selling off their BTC at a rate almost 50% lower than the asset’s current market price.
Furthermore, on Tuesday, reports of a lawsuit filed against Grayscale by New York-based top hedge fund Fir Tree Capital Management. The lawsuit alleges that Grayscale has likely mismanaged the GBTC trust and is looking to investigate the issue with access to certain documents about it.
Fir Tree Capital Management, in the lawsuit, also argues that Grayscale has harmed the 850,000 investors of the GBTC trust with its “shareholder-unfriendly actions,” claiming the policy on the redemptions of shares for the trust is “self-imposed.”
The GBTC Trust is Grayscale’s Most Important Product
Despite the issues investors are facing with GBTC, the Bloomberg report affirms its position as the most significant product of the DCG corporation. With assets under management to the tune of $10.8 billion as of press time, and a 2% annual fee, GBTC pumps the most funds into Grayscale, and DCG.
Bloomberg estimates that the trust is poist to rack in over $200M every year for Grayscale, considering its current position. GBTC’s annual fee is way above the reality of most investment vehicles provided by Grayscale. The proShares Bitcoin Strategy ETF, in particular, has a 0.95% fee.
Cathie Wood, CEO of asset manager Ark Invest, highlighted the significance of Grayscale’s digital asset trusts in a Bloomberg interview last month. According to Wood, the trusts are the most valued part of the firm and they are going to attempt to sustain them when all else fails.
In the wake of the discounted rate, Cathie Wood’s Ark Invest purchased 176,945 GBTC shares valued at $1.5M on Monday. Ark Invest’s purchase was made at a GBTC discounted rate of 45%. The latest purchase followed a similar move last week which saw Ark Invest amass 315,259 GBTC shares worth $2.8M. The company now holds 6.4M shares valued at $53M.