Grayscale Bitcoin Trust, (GBTC), is the largest Bitcoin trust in the world, with billions in BTC. But, in the last year, it has not been able to keep pace with the market. This has led to a substantial premium, which has continued to grow through the bear market. Currently, the GBTC trades at a record-high premium which has sparked speculations about a possible BTC sale-off.
GBTC nears 50% premium
The crypto space faced many challenges in November and the GBTC Premium reflects this. It also shows a near-steady rise in the premium or discount to NAV, which continues into December.
On December 7, the GBTC premium was converted to NAV one of its largest jumps when it move from 43.61% on Dec. 6 to 47.27% on Dec. 7. This has pushed the premium to new highs. Although the increase was not as dramatic, the GBTC closed last Wednesday at a premium to NAV 48.62%.
Now, what this means is that the price of ‘one BTC’ is trading for 48.62% lower on the GBTC than it is on the spot market. Normally, this would present as an opportunity to buy for cheap but GBTC investors are not buying any actual bitcoin, and with the issues that Grayscale’s parent company, DCG, has been facing, it has become increasingly obvious to investors that the fund may be headed for trouble.
Is this going to lead to a Bitcoin sell-off?
The GBTC currently holds more than 640,000 BTC worth around $11 billion at today’s prices. Grayscale is not the only concern in these speculations, but its parent DCG.
DCG is said to have $2 billion in debt. The majority of that comes from Genesis Trading. Genesis Trading had only limited withdrawals just a few weeks back. Rumours circulating online suggest that DCG used GBTC shares as collateral for its Genesis loan, which accounts for the majority of the loan.
GBTC share price at $8.01| Source: Grayscale Bitcoin Trust (BTC) on TradingView.com
A recent episode of ‘The Chopping Block’, Haseeb Qureshi, Managing Partner at Dragonfly Capital, said that the $1.1 billion promissory note to Genesis could be “callable. This means that DCG would have to pay the entire loan amount if Genesis was liquidated or goes bankrupt. DCG doesn’t have the funds to pay it back if that happens. DCG could then look to GBTC as a source of bailout if that were to occur.
Despite this, the GBTC has continued to withstand any adversity. Coinbase has previously publicly stated that it holds all of GBTC’s bitcoin in its custody service, and if prices were to start recovering from here, then the premium to NAV could begin to close.