Just a few days after GBTC traded at a 15% discount to its BTC equivalent, Grayscale Investments has temporarily closed the trust to investors.
Grayscale Investments’ GBTC Bitcoin Trust has been under the heat for the last couple of weeks as it traded below the BTC equivalent for each share. The instrument trades on over-the-counter markets and is by far the largest listed cryptocurrency asset.Periodically, the private-placement offerings for GBTC shares are temporarily closed, as well as similar products offered by Grayscale Investment such as the Ethereum Trust. As of March 7, both GBTC and the Digital Large Cap Fund (GDLC) are under such periods.The fact that the only investment vehicles containing Bitcoin (BTC) have temporarily closed their issuance and the timing of the pause seems a bit odd as GBTC reached a record-high 15% discount to the BTC-equivalent for each share on March 5.Grayscale Bitcoin Trust landing page. Source: GrayscaleGBTC shares used to trade above the equivalent BTC held by the trust, an effect caused by the excess retail demand. Meanwhile, institutional clients were able to buy shares directly from Grayscale at par.This demand-instability created an arbitrage opportunity where clients could buy at par directly from Grayscale Investments, hold their shares for the 6-month lock-up period, then sell them on secondary markets with a premium attached.Grayscale Bitcoin Trust premium to BTC. Source: TradingViewThis strategy yielded excellent results as the GBTC premium over its BTC equivalent content ranged from 5% to 40%. It is worth noting that excess demand on secondary …
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