Grayscale suspends trading on their Bitcoin Trust

Grayscale asset management has halted trading on their Grayscale Bitcoin Trust (GBTC), currently the world’s largest publicly-tradable bitcoin investment fund.

Trading had stopped on Wednesday after the GBTC traded at a 15% discount to the price of the bitcoin the fund holds.

The exact reason for the decision is not clear at the the time.  The Grayscale website is now showing the following message at its GBTC page:

“The Grayscale® Bitcoin Trust private placement is offered on a periodic basis throughout the year and is currently closed.

GBTC has been trading below the price of bitcoin for a few weeks now, being susceptible to recent developments on the number of alternative bitcoin trusts and Canadian bitcoin exchange-traded funds (ETF). Digital Currency Group (DGC), Grayscale parent company and owner of CoinDesk, announced today that it is buying up $250 million in GBTC shares, in an effort that to increase the price of the shares by creating demand while simultaneously decreasing the numbers of outstanding shares.

Unlike an ETF, which is is considered to provide more pure exposure to bitcoin and its structure better reflects price movements of bitcoin, the GBTC has no redemption mechanism and its shares have often become disconnected from the fund’s underlying value. In 2017, the fund traded at up to a 132.6% premium compared to the price of bitcoin held by the fund at the time.

While being approved in Canada, Bitcoin ETF products have yet to be approved for trading in the U.S, however demand is clear. Grayscale have recently opened several ETF-related positions in the company thereby anticipating upcoming green light on the product.