Arcane Research explains why Grayscale’s GBTC began trading at a discount

Since February 23, Grayscale Bitcoin Trust (GBTC) shares have traded at a discount to the price of the first cryptocurrency, whereas historically they traded at a premium. Arcane Research analysts have found an explanation for this.

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— Arcane Research (@ArcaneResearch) March 9, 2021

They noted several reasons for the discount to NAV:

• the emergence of new similar products, the launch of Bitcoin funds, and direct purchases of the first cryptocurrency by individual companies;
• active arbitrage, driven by the end of the lock-up period for GBTC buyers.

Researchers noted that the current situation could prove painful for some arbitrageurs — if they used leveraged trading, margin calls may follow. To avoid this, traders may have to sell collateral, which could put downward pressure on the Bitcoin price.

Analysts explained that this does not necessarily imply the observed GBTC discount to the price of the first cryptocurrency will persist. This view rests on the assumption that arbitrage participants have, in general, built proper risk-management policies.

GBTC price dynamics and GBTC premium/discount to NAV. Data: Arcane Research.

As of writing, the GBTC discount to Bitcoin price stands at 5.43%.

Dynamics of GBTC premium/discount to NAV. Data: yCharts.

In February the crypto-lending platform BlockFi launched a competitor to Bitcoin Trust from Grayscale Investments.

In January, venture firm Pantera Capital announced the launch of a fund based on the first cryptocurrency.

Earlier, the investment firm SkyBridge Capital launched a Bitcoin fund with assets of $310 million.

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