Investors unfamiliar with Bitcoin (BTC-USD) investors turned to Grayscale Bitcoin Trust (GBTC) instead. The investment vehicle enabled investors to get BTC exposure through a stock holding.
This is not working out.
On Dec. 8, GBTC’s discount to net asset value widened to an all-time high. GBTC refuses to show its proof of reserves. It cannot reveal its holdings of fears that the market will use the information against it. Yet the lack of disclosure is unsettling markets. GBTC holders are relying on the fund’s assurances that assets are safe and secure.
Days before FTX filed for bankruptcy, the founder said it had adequate liquidity. Other exchanges and lenders offered similar assurances before going under.
Managing Bitcoin trust comes with costs. The asset will have an inherent discount to include those costs.
Risks of the Binance cryptocurrency exchange and Tether destabilizing in the coming months are another risk. A meltdown in either or both of those could hurt Bitcoin prices. This would send GBTC even lower.
Tether is an asset-backed crypto stablecoin. In May, Tether fell to a low of $94.55 during the Terra ecosystem collapse. It already lost at least $18 billion in total circulation between May 2022 and November.
