A Deep Dive into the One-Year Grayscale Bitcoin Rebate


The Grayscale Bitcoin Trust is arguably the most popular bitcoin trust in the world. The advent of trust has cemented institutional investor interest in the crypto space, bringing with it widespread popularity. However, the trust itself, despite being widely popular, fell short of expectations. It had started trading at a discount in 2021, and now, a year later, the trust continues to trade at a significant discount.

The gap has widened as trust tries to recover since the end of 2020. In this report, we look at the performance of the Grayscale Bitcoin Trust over the past year and what the Digital Currency Group is doing to fight against this ever-increasing discount. .

Grayscale Bitcoin Trust Cuts

The Grayscale Bitcoin Trust had started trading at a discount in 2021 following a large inflow of funds into the trust in 2020. It was a largely successful year for the trust that gave investors a way to bet directly on the digital asset without having to have one. direct exposure to cryptocurrency. These massive inflows, while welcome at this point, would prove detrimental to confidence over time.

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The following year, 2021, saw the Grayscale Bitcoin Trust begin trading at a discount. GBTC shares had effectively saturated the market at this point and with so many shares in the secondary market, there was selling pressure from investors. Most of these investors originally planned to use in-game arbitrage with stocks by buying them in kind and then selling the stocks later at a premium. However, the selling pressure induced by this market saturation continued throughout the year.

GBTC trading at a 29% discount | Source: Arcane Research

Grayscale Bitcoin Trust has now consistently traded at a discount for a year this month. This discount is calculated by relating its market price to the net asset value of the fund, which has continued to fall.

How GBTC Fights Rebate

Grayscale Bitcoin Trust has tried to combat this growing discount. They recently announced that they were initiating a $250 million stock buyback. This would help absorb some of the equity supply that has saturated the market and led to this growing discount.

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It’s a plan that could certainly impact the discount and narrow the gap, but that impact may end up being short-lived. A real stop to rebates would be the emergence of a premium in GBTC, but competition remains fierce given that a number of BTC ETFs and ETPs have already been launched, all of which compete directly with GBTC. As such, a premium on GBTC shares remains unlikely.

TradingView.com Bitcoin Price Chart

BTC drops to $41K | Source: BTCUSD on TradingView.com

Another way is that the Digital Currency Group tried to hide the trust in an ETF. Now, if this succeeds, then Grayscale can definitely fix the discount issues once and for all. Converting the trust into an ETF would result in the shares trading at NAV due to the active redemption program that would emerge. But even that remains an uphill battle.

Grayscale Bitcoin Trust is still trading at a 29% discount to the share price relative to its net asset value.

Featured image from SuperCryptoNews, chart from TradingView.com

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