GBTC trading at 45% discount to NAV less than a week from SEC trial

With less than a week until Grayscale presents oral arguments against the Securities and Exchange Commission, the discount price of Grayscale Bitcoin Trust (GBTC) traded at at a low of 45.9% relative to net asset value on Thursday, according to data from The Block. The GBTC discount hit an all-time low on Dec. 13, when it reached 48.8% relative to NAV.

GBTC trades at a discount to the NAV of the fund, since holding shares in the fund doesn’t grant the holder access to its underlying assets. Until early 2021, shares in the fund traded at a premium before flipping to a discount. As a result, the market price of GBTC shares is more than 47% lower than the value of the bitcoin in the fund or its NAV.

The fund will appear in the District of Colombia Court of Appeals this Tuesday March 7, contesting the Securities and Exchange Commission’s decision from June 2022 to deny the conversion of GBTC into an exchange-traded fund.

The SEC cited Grayscale’s failure to address concerns about market manipulation and investor protections in its initial ruling.

But a number of other concerns also have put pressure on the fund. Grayscale’s sister company, Genesis, filed for bankruptcy protection in January after taking a financial hit following the collapse of crypto hedge fund Three Arrows Capital and exchange FTX last year.

While Genesis and its parent company Digital Currency Group reached an initial agreement for a restructuring plan last month, uncertainty remains regarding how this might affect Grayscale.

The firm also faces other legal troubles. In December, Fir Tree Capital revealed plans to sue Grayscale over concerns of potential mismanagement and conflicts of interest.

Asset manager Osprey Funds, a competitor to Grayscale, also sued the fund in January, arguing that Grayscale’s advertisements were misleading regarding the likelihood that GBTC would be converted into an ETF.

Osprey accused the fund of “unfair and deceptive acts and unfair competition.»

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