GBTC premium hits record low of -34% as crypto fund ‘spits out’ token

As fears of contagion were amplified and asset prices plummeted, it was a dark day for institutional investors in cryptocurrencies.

The largest Bitcoin investment vehicle, the Grayscale Bitcoin Trust (GBTC), is currently trading at its largest discount to the spot market ever.

Data from on-chain analytics resource Coinglass shows that as of June 17, the price of GBTC shares was 34% lower than the price of BTC/USD on major exchanges.

GBTC hit hard in market downturn

As the ongoing turmoil in DeFi spills over into the cryptocurrency market, the situation for investors large and small is deteriorating.

The latest data shows that institutions have clearly failed to avoid contagion, with the already underperforming GBTC falling to new lows.

The GBTC premium has long been an inappropriate name, as the fund’s shares 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 Bitcoin’s spot price, also known as net asset value or NAV.

The spot market saw a similar drop as BTC/USD retested $20,000 twice.

GBTC premium hits record low of -34% as crypto fund 'spits out' token

GBTC premium vs. asset holdings vs. BTC/USD chart  

Source: Coinglass

As Grayscale seeks approval from U.S. regulators to convert GBTC into a Bitcoin spot-price exchange-traded fund (ETF), crypto institutional offerings continue to be on the back burner amid heightened government concern over the Terra and Celsius disasters.

While the company remains optimistic about the outlook, GBTC’s performance has not escaped the eyes of commentators who have pointed the finger at regulators for inaccurate risk assessments.

Bitcoin spot ETFs remain illegal in the U.S. for investor protection reasons, giving countries like Canada and Australia a first-mover advantage.

While Bitcoin is trading up 5%, GBTC is now 66.9% below its 2017 peak.

Be sure to thank Mr. Gensler for your protection.

— Dylan LeClair (@DylanLeClair_) June 16, 2022

Vijay Boyapati joked this week: “Without ETF approval, GBTC could have a -100% premium over NAV.”

Hayes predicts D-Day (the day when something big is scheduled to happen) at the bottom of the crypto market

The situation was reportedly not helped by liquidity issues at multiple crypto funds, which are already facing heavy losses. Troubled Three Arrows Capital (3AC), for example, is the largest GBTC holder with more than 38.8 million shares.

A stark gap has emerged between GBTC and its rivals as 3AC failed to meet margin calls this week. The ProShares Bitcoin Strategies 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 biggest names in cryptocurrency investing are facing a “styx” moment.

In his latest blog post on June 17, Hayes delivered a fresh blow to the fortunes of the beleaguered Celsius, Terra and other projects.

He predicts: “When this group of companies is forced to spit out any assets that are not locked in some sort of long-term income strategy, be aware of the following.”

There will be more willful sales of all liquid assets on loan books so that these lenders can return assets to retail savers.

Previously, Hayes had predicted a minimum price of $1,000 for Ethereum and $25,000 for Bitcoin, but admitted that the reality is much worse.

He added that the upcoming July 4 holiday weekend should provide ideal conditions for a macro bottom, especially as the second quarter draws to a close.

“June 30 to July 5 is going to be a wild downward journey,” he continued in a blog post.

The $25,000 to $27,000 Bitcoin bottom and the $1,700 to $1,800 Ethereum bottom that I predicted have been shattered. How low can we fall? I’m sure we’ll find out this fateful weekend.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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