Grayscale's Bitcoin Trust Shares Hit Record Discount of 36.7%

As bitcoin BTC$94,077.81 continues to hit record low prices, the shares in Grayscale Investment's bitcoin trust (GBTC) have hit a record low.

The discount in GBTC shares relative to the value of the underlying asset held in the fund widened to a record 36.7% on Nov. 7. Bitcoin has dropped by nearly 20% during the past two weeks as the bear market shows its ugly claws.

Analysts say that a continued widening of the GBTC discount shows a weakening institutional demand for bitcoin, combined with the ready availability of bitcoin exchange-traded funds for retail.

In a note to CoinDesk, Henry Liu, CEO of BTSE, a trading infrastructure provider, said that the GBTC discount hitting such extreme levels is because of the liquidity crunch post FTX's collapse.

"This has resulted in thinning liquidity, wider spreads, and increasing volatility across the industry, particularly for BTC," Liu said.

GBTC is a close-ended fund, meaning BTC deposits are perpetually locked, but GBTC shares can be sold on the market after a six-month lockup.

In June, Grayscale launched a suit against the Securities and Exchange Commission (SEC) which denied the company’s application to convert the Grayscale Bitcoin Trust into an exchange-traded fund.

Three Arrows Capital was a large holder of GBTC, and told Bloomberg in July that arbitrage trading the premium was one of the factors that led to the collapse of the fund.

Grayscale and CoinDesk share the same parent company, Digital Currency Group.