GBTC falls into historical record high negative premium, Grayscale still seeking transformation to ETF to break free.

Grayscale's Bitcoin fund GBTC has encountered an unprecedented predicament, reaching a historical discount of nearly -19% on the 22nd, indicating that the price of the Bitcoin assets represented by the GBTC fund on the secondary market is even lower.

The Unstoppable Negative Premium

Twitter users commented: "On January 6, 2021, the price of Bitcoin was $36,150, while the price of GBTC was $43.93; on April 22, 2021, the price of Bitcoin was $52,900, and the price of GBTC was $41.32. Why did the price of GBTC decrease even though the price of Bitcoin rose?"

Looking back at most of the time, GBTC has been trading at a premium, meaning that institutions investing in Grayscale can potentially sell their GBTC shares at a profit on the secondary market. However, this situation saw a significant change in 2021:

A double-digit negative premium first appeared on March 4 and has since been sustained. Despite the announcement on March 10 that Grayscale's parent company DCG would invest $250 million in cash to purchase GBTC, the negative premium did not stop. By April, GBTC spent most of the time at a double-digit negative premium.

Comparing the price fluctuations of Bitcoin and GBTC, it is evident that the price of GBTC has decoupled:

The reasons for the negative premium might include the issuance of Bitcoin ETFs in Canada, providing institutional investors with more options. As reported earlier, with the emergence of competitors such as MicroStrategy's "Priority Convertible Bonds," Canadian Bitcoin ETFs, bank's main brokerage business, and the launch of other Bitcoin funds, Grayscale's competitive edge has rapidly declined. Investors no longer have to take the risk of locking their funds for six months to invest in Bitcoin. After institutional investors' GBTC lock-up periods expire, they will release pressure on the market, leading to oversupply and the occurrence of the negative premium.

ETF Transformation Might Be Slower Than Expected

Grayscale stated on their official Medium page that converting GBTC into a Bitcoin ETF has always been the company's "ultimate goal": "First and foremost, we are 100% committed to converting GBTC into a Bitcoin ETF."

However, the topic of Bitcoin ETFs is not something that can happen overnight. Several institutions in the United States have been applying for years without receiving approval, indicating that Grayscale's path to ETF transformation may not be easy.