Grayscale Bitcoin Trust Shares Climb 12%

On Monday, there was a rise in shares of the struggling Grayscale Bitcoin Trust (GBTC), which narrowed its discount from BTC.

There was an 11.56% increase in the OTC-traded security price, as it climbed to $9.65. This reduced the discount of the GBTC against its Bitcoin holdings’ NAV (net asset value) to 38.55%.

This is the smallest gap to have existed between the two since November of 2022.

GBTC

Investors interested in exposure to Bitcoin, but not wishing to physically purchase and hold the asset can opt for GBTC, as this is a financial vehicle listed publicly.

Historically, the trust had always traded at a premium to BTC, but had been stuck with a big discount since February of last year.

However, this rise in price comes at a time when the investment firm that launched the trust i.e. Grayscale Investments and also its parent firm, Digital Currency Group (DCG) are facing a horde of problems.

Discount woes

Grayscale is considered the world’s largest holder of Bitcoin after Satoshi Nakamoto, the pseudonymous creator of Bitcoin.

Treasuries listings show that the total number of Bitcoin that Grayscale owns stands at 643,572, which has a value of $11.1 billion.

Market volatility was the reason that the GBTC discount appeared and shareholders found themselves unable to redeem their shares.

According to Michael Sonnenshein, the CEO of Grayscale, in order to offer better protection to its investors, it attempted to convert the GBTC into an exchange-traded fund (ETF).

But, Grayscale is not the only entity to have applied for launching a Bitcoin ETF in the United States and like others, it was also shot down by the country’s regulators.

A lawsuit was filed by Grayscale against the SEC last June for rejecting its application for a spot Bitcoin ETF.

Crypto ETFs have been approved in other countries, like Canada, which are giving competition to GBTC, as are Bitcoin futures ETF, which are traded in the US. These may have also contributed to the discount.

Grayscale investors

Since GBTC holders do not have the option of redeeming their shares, they are now pressurizing Grayscale to make changes to its rules in order to add some liquidity.

Fir Tree Capital, a hedge fund based in New York, has filed a lawsuit against Grayscale in which it has been accused of conflicts of interest and potential mismanagement.

Valkyrie, a rival investment firm, has also come up with a proposal of becoming GBTC’s new manager and sponsor.

The proposal suggests that GBTC holders conduct a vote for changing the management, but there are doubts about this possibility.

Meanwhile, DCG, the parent firm of Grayscale, has also become embroiled in a spat with Cameron Winklevoss, the founder of the Gemini exchange.

Last week, Barry Silbert, the founder of DCG, received a letter from Winklevoss about solving the issue of $900 million that is owned to Gemini by Genesis, another company that DCG owns.

A deadline of 8th January had been set. Winklevoss also accused DCG of borrowing funds from its own subsidiary worth $1.7 billion, which the latter has denied.

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