GBTC Premium Hits -34% All-Time Low as Crypto Funds ‘Vomit’ Tokens

Bitcoin’s largest investment vehicle, the Grayscale Bitcoin Trust (GBTC), is now trading at its biggest discount on the spot market.

Data from on-chain analytics resource Coinglass shows GBTC shares fell 34% against BTC/USD on major exchanges as of June 17.

GBTC suffers from market downturn

Amid the ongoing turmoil in DeFi spreading to infect the crypto market, conditions have deteriorated for investors large and small.

The latest figures now show that institutions have definitely failed to avoid contagion, and the GBTC, already underperforming, has hit new lows.

The GBTC premium, long a misnomer because the fund’s shares actually cost less than Bitcoin itself, is hovering around its lowest ever. On June 17, they were trading at a price 34.2% lower than the spot price of Bitcoin (also known as the net asset value or NAV).

A sharp downturn accompanied a similar drop in spot markets as BTC/USD retested $20,000 twice.

GBTC premium versus asset holding chart against BTC/USD. Source: Coinglass

As Grayscale seeks permission from United States regulators to convert GBTC into a Bitcoin spot price exchange-traded fund (ETF), conditions continue to look unfavorable for institutional crypto products amid increased government attention to root of the mergers of Terra and Celsius.

While the company remains optimistic about the outlook, GBTC’s performance hasn’t escaped commentators, who point fingers at regulators for what they see as an inaccurate risk assessment.

Bitcoin spot ETFs remain banned in the US due to investor protection concerns, allowing countries like Canada and Australia to gain first mover advantage.

“Without ETF approval, GBTC may move to a -100% premium over NAV”, Vijay Boyapati joked this week.

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Hayes Names D-Day for Crypto Market Bottom

This situation has not been helped by reported liquidity issues in multiple crypto funds with exposure to those already facing severe losses. Beleaguered Three Arrows Capital (known as 3AC), for example, is the largest holder of GBTC with more than 38.8 million shares.

Related: These 3 Metrics Suggest Bitcoin’s Price Drop Isn’t Over

As 3AC fails to meet margin call requirements this week, a stark gap opens up between GBTC and its competition. The ProShares Bitcoin Strategy ETF (BITO), the first US-approved ETF based on Bitcoin futures, has even added BTC to its assets under management in recent days.

For Arthur Hayes, former head of derivatives giant BitMEX, some of the biggest names in institutional crypto investing are facing a “River Styx” moment.

In his latest blog post on June 17, Hayes struck a further blow at the fate of the Celsius, Terra, and more projects.

“As this cohort of companies is forced to throw up any assets that aren’t locked into some long-term performance strategy, watch below,” he predicted.

“There will be a more wholesale sale of all liquid assets on their loan books so that these lending companies can return the assets to their retail depositors.”

Having previously called a bottom of $1,000 for Ether (ETH) and $25,000 for Bitcoin, Hayes acknowledged that the reality had been much worse.

The upcoming Fourth of July holiday weekend, he added, should provide ideal conditions for a macroeconomic bottom, particularly as the second quarter draws to a close.

“June 30-July 5 is going to be a wild ride down,” the blog post continues.

“My bottom levels of Bitcoin $25,000 to $27,000 and Ether $1,700 to $1,800 were in tatters. How low can we go? I think we will find out in this fateful weekend.”

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