Ahead of an anticipated conversion to a spot bitcoin exchange-traded fund (ETF), the discount on the largest bitcoin (BTC) fund in the market, Grayscale Bitcoin Trust (GBTC), has dropped to its lowest point since April 2021.
According to data, the discount hit a level last seen in June 2021 on Monday, dropping as low as 5.6%. Since February 2021, the fund has traded at a discount, which peaked in December 2022 at about 50%. However, anticipation of the approval of an ETF and growing enthusiasm towards bitcoin have gradually reduced the discount.
On Monday, it closed at $39. As of Tuesday, each GBTC share is worth $41.86 in bitcoin. Because there is no internal market mechanism in place within the trust to maintain the price of the GBTC share close to the underlying value of the bitcoin, traders are free to take advantage of discounts and premiums as part of their trading strategy.
As of Tuesday, buying GBTC is one of the only ways American stock traders can follow the fluctuations in bitcoin’s price without having to buy the virtual currency itself.
Given that a premium could indicate demand for bitcoin while a discount could indicate a decline in traders’ interest in the cryptocurrency, this could be interpreted as a bearish indicator.
Along with twelve other participants, Grayscale is presently awaiting word from the U.S. Securities and Exchange Commission (SEC) regarding the trust’s uplisting as an ETF.
As part of its proposed upgrade to a spot bitcoin ETF, Grayscale has lowered its management fee from 2% to 1.5%, as per an updated S3 filing on Monday. Its assets under management (AUM) exceed $27 billion.
It will be the most costly offering for investors if it is accepted. Prospective issuers like BlackRock plan to start their bitcoin ETF at 0.20% and increase it to 0.30%, while Bitwise, a fund manager with a focus on cryptocurrency, would charge the lowest fees at 0.24% after six months without charging anything.