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Shares of the world’s largest bitcoin fund, Grayscale Bitcoin Trust (GBTC), hit a record-high discount rate of nearly 50% relative to the price of bitcoin (BTC) on Thursday.
This article originally appeared in Crypto Markets Today, CoinDesk’s daily newsletter diving into what happened in today’s crypto markets. Subscribe to get it in your inbox every day.
- GBTC is a way for investors to gain exposure to bitcoin through a traditional investment vehicle. GBTC was trading at a discount rate of 47.3%, according to data from crypto index provider TradeBlock.
- “The fact that Grayscale’s Bitcoin Trust is now trading at nearly 50% discount is just awful for holders of GBTC. It really highlights the vast differences in structure quality between different investment vehicles,” Bradley Duke, co-CEO at ETC Group, said in a note to CoinDesk.
- Bearish sentiment surrounding the trust deepened over the last few weeks as fears surfaced that crypto trading firm Genesis Global Trading, which is owned by Grayscale’s parent company, Digital Currency Group (DCG), could file for bankruptcy. DCG is also CoinDesk’s parent company.
- Following the collapse of crypto exchange FTX, Genesis Global Trading announced on Nov. 16 that it would halt customer withdrawals from its lending unit, Genesis Global Capital. Amid speculation about a possible filing, Genesis said in a note to clients on Wednesday that a resolution of the lending unit’s withdrawal freeze is likely to be a matter of “weeks” rather than days.
- GBTC shares haven’t traded at a premium to bitcoin since March 2021. Prior to that date, the trust benefited from strong institutional demand and traded at a double-digit premium to its net asset value.
Bitcoin (BTC): The largest cryptocurrency by market capitalization was trading around $17,200, up 2.2% in the past 24 hours. BTC was hovering below the $17,000 mark earlier in the day but then jumped around 1:20 p.m. ET to trade as high as $17,293. Equity markets also turned green, with the S&P 500 index closing up 0.75%.
Ether (ETH): The second-largest cryptocurrency in market value also turned green, recently jumping 3.8%. The rally came after Ethereum developers determined the network’s next hard fork, called “Shanghai,” will have a target release time frame of March 2023. This upgrade will include code known as EIP 4895 that will allow Beacon Chain staked ETH withdrawals. Ether fell 17% last month, breaching an ascending trendline connecting June and October lows.
Wave (WAVES): The native token of the Waves blockchain was trading down 8.8% to $2.10 after South Korea-based exchange Upbit warned its users against investing in WAVES. WAVES is a digital asset used as collateral for USDN, a stablecoin aiming to peg its value to 1 USD with an algorithm. Currently, the value of USDN is not properly linked to $1 dollar, according to Upbit.
CoinDesk Market Index (CMI) 869.10 +18.8 ▲ 2.2% Bitcoin (BTC) $17,215 +377.6 ▲ 2.2% Ethereum (ETH) $1,282 +52.8 ▲ 4.3% S&P 500 daily close 3,963.51 +29.6 ▲ 0.8% Gold $1,801 +15.8 ▲ 0.9% Treasury Yield 10 Years 3.49% ▲ 0.1 BTC/ETH prices per CoinDesk Indices; gold is COMEX spot price. Prices as of about 4 p.m. ET
Crypto Market Analysis: How Confident Are Institutional Investors About Bitcoin? COT Report May Offer Clues
By Glenn Williams Jr.
The three-month rolling, annualized basis for BTC remains below zero, reducing the incentive for traders to place market neutral carry trades.
When the basis is positive, traders are inclined to simultaneously buy bitcoin in spot markets and sell BTC in futures markets, pocketing the difference in yields. The same holds true for ether (ETH), whose three-month basis has been below zero since Nov 12. Bitcoin’s chart highlights recent price inelasticity. Since Dec. 1, prices have moved a total of .001%.
Ultimately, this market favors investors with long-time horizons and significant comfort in BTC’s valuation. Friday’s Commitment of Traders (COT) report will provide insight into the degree to which institutional comfort may be shifting.
Bitcoin 12/8/22 (TradingView)
Read the full technical take here.
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