Why is GBTC trading at a discount?

GBTC has traded at a discount to its bitcoin holdings since February 2021. The situation dramatically worsened last year in the aftermath of FTX blowing up. In November, the lending arm of Genesis halted customer withdrawals, and the GBTC discount increased to 43%.

What is GBTC premium?

The GBTC premium refers to the difference between the value of the assets held by the trust against the market price of those holdings. GBTC products usually trade at a premium cost to the current value of the holdings or net asset value since it is a regulated path to Bitcoin exposure and is backed by institutions.

How does GBTC work?

How it works: That's because GBTC is not an ETF (it wants to be). And its trust structure makes them inflexible to ever-changing supply and demand. So when GBTC was only bitcoin game in town, market demand outstripped supply, shares of GBTC was trading at a premium or for more than the underlying bitcoin it represents.

Should you invest in GBTC?

One very evident disadvantage of investing in GBTC instead of directly investing in BTC is that shares in the trust come with a significantly high up-front cost. The second reason could be that it takes some time for price fluctuations in BTC to be reflected in GBTC’s price.