Key points

• Since the beginning of this year, GBTC funds have increased by 25%, while the underlying asset Bitcoin has increased by 4%
• Now, the discount rate returns to normal 37% before the FTX crash
• Only four weeks ago, the discount reached a record high of 50%

Grayscale Bitcoin Private Equity Fund, the largest Bitcoin fund in the world, has jumped to 25% in value since the beginning of this year. On the other hand, Bitcoin has only increased by about 4% this year.

This means that the discount of the underlying asset Bitcoin is at the lowest level in several months. I also explained this kind of difference four weeks ago in December, when the discount reached the highest level of 50% in history.

Now, the discount rate is 37%, which is very shameful to return to the previous level of FTX.

How much is the grayscale discount?

Grayscale is a private equity fund, which provides investors with a way to get the openness of Bitcoin in the case of unrealistic purchase of Bitcoin. This is very convenient for some Bitcoin market institutions or other entity lines that cannot participate due to regulatory or legal reasons.

But Grayscale rarely trades at the same price as its net asset value. Previously, along with the urgent need for investors to access this fast-growing cryptocurrency, the stock price of Bitcoin soared, and the purchase and sale price of Bitcoin compared with the equity premium of basic Bitcoin.

Today, however, the opposite is true - substantial discounts. Although there are also 2% high costs that can express some discounts, this is not enough to fill the discount of more than 30% that we have seen in this data encryption winter.

The SEC recently rejected Grayscale's application to convert this private fund into an exchange-traded fund, which means that it is short-selling for the fund. With the release of similar funds, especially in Europe, and the filing of Bitcoin ETFs, the market competition has become increasingly fierce.

The most worrying is the security of the reserve. After the collapse of FTX, there are more and more conjectures that Digital Currency Group (DCG), the head office of Grayscale, is likely to declare bankruptcy.

DCG is the head office of Genesis. Genesis recently laid off 30% of its employees and is reportedly trying to close down. When Grayscale refused to release a report confirming the reserves, everyone's anxiety increased. The report suddenly emerged after FTX's mischievous personal behavior behind the scenes.

It introduced "security concerns" as the main reason why it is unlikely to accomplish this, but investment analysts said it was not clear what security concerns might be caused by publishing public records on blockchain technology.

6) Coinbase often implements on-chain authentication. For the sake of security, we should not publish such on-chain wallet information and confirmation according to the data encryption reserve certificate and other high-end data encryption financial accounting procedures.

-Gray value (@ gray value) November 18, 2022

Why did the discount end?

Although the discount is still 37%, it has decreased from the surprising 50% after the FTX implosion.

DCG is under great pressure to solve this problem. Professionals call on private equity funds to allow investors to redeem their Bitcoin holdings, which will enable them to realize all the use value of Bitcoin. Such shouting is likely to help overcome obstacles.

First Tree, a hedge trading fund, even filed a lawsuit against Grayscale, stipulating that the enterprise should either reduce its expenses or allow it to redeem, so as to close the discount.

But like everything in cryptocurrency today, macros can still be fully used. At the beginning of this year, the price of cryptocurrency has risen, and the optimistic attitude towards inflation is likely to have peaked. In the next month, the encryption market is relatively quiet.

After the collapse of FTX, the discount has increased to some extent, so people are worried about the spread of the dilemma, while the main funds are still falling. Similar to the nailing of Tether when the UST dilemma occurred.

Now, the normal service items have been repaired to a certain extent, and the discount has already been reduced. For investors, it is regrettable that it is still a surprising 37% lower than the total net assets. In the year when Bitcoin itself plummeted, the last thing investors need is to discount above the drastic price adjustment