Grayscale Bitcoin Trust (GBTC) remains the largest bitcoin trust in the world with billions of dollars worth of BTC, but over the past year the trust has struggled to keep up with the market. The result was a high premium that continued to increase during the bear market. Currently, the GBTC is trading at a record high premium, which has led to speculation about a possible BTC sell-off in the pipeline.
GBTC is approaching 50% premium
The month of November was fraught with adversity for the crypto space and this is reflected by the GBTC bounty. It shows an almost steady increase in the discount or premium to the NAV that has continued into the month of December.
On December 7, the GBTC premium was cut to NAV one of the biggest jumps when it went from 43.61% on December 6 to 47.27% on December 7. This has pushed the premium to new all-time highs and while the following days didn’t see such a large increase, an increase of almost 1% per day saw the GBTC close out last week with a premium to NAV of 48 .62%.
This now means that the price of ‘one BTC’ is trading 48.62% lower on the GBTC than on the spot market. Normally this would be an opportunity to buy cheaply, but GBTC investors are not buying real bitcoin, and with the issues facing Grayscale’s parent company, DCG, it has become increasingly clear to investors that the fund may be headed for issues.
Will this lead to Bitcoin selling off?
The GBTC currently holds over 640,000 BTC worth approximately $11 billion at current prices. As such, the speculation of a possible collapse stems not from concerns about Grayscale itself, but about parent company DCG.
DCG is reportedly $2 billion in debt, most of which comes from Genesis Trading, which had limited withdrawals a few weeks ago, and Eldridge. Rumors circulating the interwebs are that DCG actually holds GBTC stock to collateralize its loan from Genesis, which makes up the bulk of its loan.
GBTC share price at $8.01 | Source: Grayscale Bitcoin Trust (BTC) on TradingView.com
On a recent episode of “The Chopping Block,” Haseeb Qureshi, Managing Partner at Dragonfly Capital, said the $1.1 billion promissory note to Genesis could be “callable.” This means that if Genesis were to liquidate or go bankrupt, DCG would be obligated to pay the total value of the loan. The problem is that DCG doesn’t have the necessary amount to honor it if it does happen. Then DCG could look to GBTC for a bailout if this were to happen.
Nevertheless, the GBTC continues to hold through adversity. Coinbase has previously publicly stated that it holds all of GBTC’s bitcoin in its custody service, and if prices started to recover from here, the NAV bounty could begin to close.