Data from on-chain analytics platform Coinglass confirms that GBTC shares hit a new record high of -47.2% against BTC/USD on December 8.
GBTC problems are piling up after FTX
In the latest bout of nerves to hit the bitcoin industry since the fall of FTX, the price of GBTC is close to half the price against that of Bitcoin.
Bitcoin’s largest institutional investment vehicle, with assets worth nearly $10 billion, GBTC has faced many challenges in recent years.
Its share price previously traded higher than BTC/USD, resulting in a so-called “GBTC premium.” Since 2021, however, that premium has turned negative, but the resulting “discount” has done little to attract additional institutional interest.
As Cointelegraph reported, along with some major exceptions like ARK Invest, GBTC is weakening as operator Grayscale, part of Digital Currency Group (DCG), is trying to turn it into an exchange-traded fund (ETF) — suing US regulators who stand in its way.
Amid the legal battle, FTX has raised liquidity issues elsewhere in the DCG empire, and this has led to suspicions about Grayscale and GBTC. Grayscale refused to show proof of BTC reserves last month, despite assurances by custodian Coinbase that its assets were safe, adding to tensions.
“Grayscale is in some real trouble if they have to disclose the whereabouts of all GBTC-supporting bitcoins,” Bitfinex’ed a popular commentator wrote in part of a Twitter discussion on the subject this week.
Things got worse this week, however, as Grayscale faced a lawsuit from investor Fir Tree over what it calls “shareholder unfriendly actions.”
GBTC premium vs asset holdings vs BTC/USD chart. Source: Coinglass
Meanwhile, public interest in crypto ETFs has declined this year, according to separate data.
Woo: “Partly bullish” issues for Bitcoin
However, the GBTC premium, having barely recovered from previous record lows, sank further against Bitcoin, which is known to correlate with net asset value (NAV).
Related: Why Did Bitcoin Price Drop Today?
“GBTC USD discount on bitcoin NAV is on the express elevator to hell. => Sentiment = bearish,” summed up Timothy Peterson, investment director at Cane Island Alternative Advisors.
Others lamented the slow pace of change in the United States as fanning the fire.
“Much of the pain could have been avoided this year if GBTC had been converted into a SEC ETF to keep everyone safe!” Investor and entrepreneur Alistair Milne reacted, echoing popular sentiment in recent weeks.
Meanwhile, Willy Woo, creator of stats resource Woobull, argued that the impact of fading GBTC exposure was not necessarily a direct negative for BTC price strength.
“GBTC/DCG/Genesis fears a bearish cloud hanging in the market. But unlike expected, part of the impact was bullish for bitcoin price,” he tweeted on Dec. 5.
“37.5% of people who sold GBTC bought spot Bitcoin to take custody. Selling GBTC does not affect the price of Bitcoin, and buying spot affects the price of Bitcoin.”
An additional Twitter survey questioned platform users who hold GBTC by default about their motives for selling.
