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Grayscale Bitcoin Trust Plans to Become ETF Amid Negative Performance

Grayscale Bitcoin Trust Plans to Become ETF Amid Negative Performance
  • Over 450,000 GBTC shares were purchased in November 2021.
  • The GBTC trust drew investors in at this time of back-to-back shocks to global markets.

Data from Glassnode suggests that institutional investors are returning to acquire Grayscale Bitcoin Trust (GBTC) shares as the discount to the current price has increased to around 30%. Grayscale’s flagship fund has seen investors pour in between $10 million and $120 million every month since December 2021. The week ending on February 25 had the most significant influx of money, totaling approximately $140 million.

A selloff in technology companies, followed by Russia’s invasion of Ukraine, left many fund managers with losses in the double digits. The GBTC trust drew investors in at this time of back-to-back shocks to global markets.

Hard Hit by Market Turmoil

As an example, the ARK Next Generation ETF (ARKW) of Cathie Wood, which owns $478 million in GBTC, fell by over 45 percent year over year since it was heavily exposed to sectors like technology (43.14 percent) and communication (27.99 percent) that were hit hard by the current market turmoil.

Over 450,000 GBTC shares were purchased in November 2021, when their discounts were approximately 17.5 percent. According to SEC filings, Morgan Stanley Insight Fund (CPODX) had more than 1.5 million GBTC as of September 30, 2021, making it one of the most significant cryptocurrency funds in existence (SEC). On March 6, 2022, its year-over-year performance was around negative 43 percent.

After 12 months of declines of 43 percent, ARKW and CPODX both underperformed. Yet neither ARKW nor CPODX disclosed selling substantial amounts of GBTC stock in their recent earnings reports. For GBTC’s underperformance, there are several variables, including the increasing competition from exchange-traded funds (ETFs). Investors in ETFs have the option of using the fund’s demand-supply dynamics to redeem their shares, which is something that is not possible with GBTC.

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