The currency bitcoin market correction has dealt a particularly harsh blow to Grayscale Bitcoin Trust (GBTC), the biggest fund tracking the cryptocurrency.
BTC Price Momentum
As bitcoin prices plummet, the fund has gone into free-fall, shedding almost 20% off its $29.4 billion valuation this week alone.The world’s first cryptocurrency is currently undergoing its worst selloff since Dec of last year, with its price slipping close to the $50K threshold over the previous 24 hours. Bitcoin extended its decline for the fifth straight day on Thursday, hitting a two-week low of $50,305 as demand for the crypto tanked.
Per the latest data by Bloomberg, the GBTC trust closed over 14% below the value of its underlying assets on March 24th, a record discount relative to its holdings.
The dislocation has deepened despite the Digital Currency Group Inc., the parent company of Grayscale Investments, unveiling plans to allocate up to $250M in fiat reserves to finance investment into GBTC.
Accredited GBTC Investors Seek to Offload Shares
Since its launch, GBTC has persistently traded at a premium to its net asset value. Investors with deep wallets have been willing to procure large amounts of BTC from Grayscale at a premium during the recent bull cycle. As a result, the number of shares outstanding in the trust has ballooned to a record 692 million.
However, with BTC prices now reeling amid an intense market reset, a supply and demand imbalance has ensued as accredited investors in GBTC seek to offload their shares into the secondary market.
Bloomberg Intelligence analyst James Seyffart shared his outlook on the trust:
“GBTC has a fixed supply and acts as a leveraged play on Bitcoin. As the price goes down, the sentiment goes down, GBTC is going to fall further than Bitcoin. The same thing happens on the way up.”
Seyffart added that the fund’s institutional demand might be cooling off after the debut of several bitcoin ETFs in Canada that are pulling away capital from GBTC.
MicroStrategy Is “On The Ropes” As BTC Price Stalls
MicroStrategy and its head Michael Saylor are often credited with kick-starting the ongoing bitcoin corporate treasury reserve trend.
Until recently, Saylor’s risky bet on BTC had been paying off, with the coin’s price almost tripling since Dec of 2020. In tandem, the value of MicroStrategy shares (MSTR) have logged parabolic growth over the past few months, following bitcoin’s upward trajectory.
However, the current bitcoin rejection has left MicroStrategy “on the ropes,” according to top analyst CryptoDonAlt. Should BTC continue with its decline, it could derail Microstrategy’s crypto-fueled rally similarly to how it has taken a bite out of the GBTC trust.
Published at Fri, 26 Mar 2021 17:00:44 +0000