Will the biggest Bitcoin trust with 635,000 BTC fall? Investors face trust issues

• The fund’s latest reports have exposed the rumors about Grayscale’s GBTC trust fund.
• A Bloomberg report claims that the GBTC trust fund is the most important investment product in the DCG regardless of investors’ concerns about the trust fund.

Per multiple reports, the leading crypto asset management firm, Grayscale investments, is having issues with its most popular investment product, Grayscale bitcoin trust (GBTC). Investors worry about various issues, notably the fund’s latest trade position. Recent on-chain data shows that the GBTC premium rate dropped to 47.8 on Friday (its lowest ever).

Also read:Will Grayscale be the Next FTX? Genesis has $1.8 Billion in debt to companies and customers

The drop indicates that the trust fund was trading at a huge discount, suggesting that investors have lost confidence in Grayscale’s financial products. However, a Bloomberg report revealed that this trend reflects investors’ sentiment toward the crypto market amidst the ongoing crypto winter.

The report added that this trend is unlikely to change soon as the bearish bias surrounding the GBTC fund will only change once the crypto winter is over. Also, there is a lot of unpleasant news surrounding the digital currency group, the parent firm of Grayscale.

Last month, one of the Digital Currency Group (DCG) ‘s subsidiaries, Genesis Global Capital (a crypto lending firm), announced that it would pause withdrawals following its exposure to the FTX collapse. Even though Grayscale has repeatedly asserted that it isn’t affected by the liquidity problems affecting genesis, many investors are still not convinced.

Market situation

Hence, it is no surprise that Grayscale’s investment products have been underperforming. As of this writing, Grayscale’s premium currently trades at minus 48.62 percent. An indication of its continued decline. As investors’ fear grows deeper following recent concerns, the trust would continue to trade at more massive discounts, indicating more intense selling pressure on GBTC than the BTC itself.

The value of the leading digital asset has dropped by 64 percent compared to GBTC, whose value has declined by 75 percent since January 2022. At its current discounted rate, the trust’s investors are selling their BTC at about 50 percent lower than the present value of the leading digital asset.

Grayscale’s issues seem unending as a top hedge fund (Fir Tree Capital management) filed a court injunction against Grayscale earlier this week. According to the court filing, Fir Tree Capital accuses Grayscale of mismanaging the GBTC trust. Hence, it seeks the court’s approval to access Grayscale’s financial records and conduct a more detailed investigation. The hedge fund also alleges that Grayscale hasn’t been transparent with its 850,000 shareholders.

The most important product in the DCG

Meanwhile, the Bloomberg report claims that the GBTC trust fund is the most important investment product among DCG’s investment products regardless of investors’ concerns about the trust fund. Grayscale and, by extension, DCG, receive a 2 percent annual fee from GBTC, the biggest among its financial products. As of this writing, the fund’s asset under management stands at $10.8 billion.

The Bloomberg report predicts that Grayscale would receive at least $200 million annually from the GBTC trust. The GBTC yearly fee is far higher than most other investment products offered by Grayscale. For instance, the ProShares Bitcoin Strategy ETF provides 0.95 percent annual fees.

In an interview with Bloomberg last month, the chief executive of Ark Invest (an asset management firm), Cathie Wood, explained the importance of Grayscale’s crypto trust products to the crypto ecosystem. Wood said Grayscale would make all efforts to sustain these crypto trusts are the firm places massive value in them.

Following the GBTC’s trading at a massive discount, Wood’s asset management firm bought $1.5 million worth of GBTC shares on December 5. Ark Invest bought its GBTC shares when the GBTC discount rate was 45 percent. Wood’s asset management firm also purchased $2.8 million GBTC shares last week. The asset manager’s moves show their confidence regarding the GBTC trust.