Grayscale Bitcoin Trust (GBTC), the world’s largest Bitcoin fund, has seen a 20 percent slide this week. This is even more than the 13 percent decline Bitcoin has seen in recent times. The BTC share price was $46,117.73 on Friday.
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What does the plunge of the $32 billion Grayscale fund mean? Well, it suggests that investors are looking for the exit now since the ascent of Bitcoin seems to have plateaued.
It is for the first time in five years that Grayscale’s BTC shares are trading at a discount to Bitcoin price. Some analysts are concerned that this could depress the cryptocurrency price further.
"This is panic or profit-taking selling," says Eric Balchunas, Bloomberg Intelligence's senior ETF analyst.
Bitcoin surged to a record of over $58,000 last weekend, before stumbling. On Thursday, the cryptocurrency fell another 1.4 percent — its worst weekly pullback in a year.
If this continues, the worry is that Grayscale could stop buying Bitcoin, which could further sink its price.
Expressing his apprehension on Twitter, crypto critic Peter Schiff said if this persists, the trust will have no more inflows and will therefore not be buying any more Bitcoin. “Without Grayscale, the biggest daily buyer, where will the new buyers come from to support the price,” he tweeted on Thursday.
The @Grayscale Bitcoin Trust has traded at a discount to NAV all day. If this persists the Trust will have no more inflows and will therefore not be buying any more #Bitcoin. Without Grayscale, the biggest daily buyer, where will the new buyers come from to support the price?
— Peter Schiff (@PeterSchiff) February 23, 2021
He added, “The market needs new buyers coming in to allow existing holders who need actual cash to buy something to get out.”
It's not about the people who already own #Bitcoin. The market needs new buyers coming in to allow existing holders who need actual cash to buy something to get out.
— Peter Schiff (@PeterSchiff) February 23, 2021
But other analysts feel that Schiff's take is overblown, and the dip in price may be a normal feature of the market.
During a panel discussion at the Bloomberg Crypto Summit, Michael Sonnenshein, Chief Executive Officer of Grayscale Investments, said, “It’s certainly a risk… but ultimately price discovery in Btc every day is driven entirely by market forces".
The Grayscale Bitcoin Trust is a pool of privately invested money that crypto fund manager Grayscale uses to snap up Bitcoin. It is the only way through which US investors can buy Bitcoin on the stock market.
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