GBTC Premium Hits all-time low as Bitcoin Price Lingers Around $20K

Key Insights:

• Bitcoin’s price is down by more than 70% from its all-time high of $69,000.
• The largest bitcoin investment vehicle – GBTC, also traded at its biggest ever discount to the spot market.
• The recent price downturn has affected mining profits as well as miners’ sentiments.

2022 has been quite a rough year for the cryptocurrency market, with the top crypto assets oscillating over 50% lower than their all-time high prices. Bitcoin’s price plunged by more than 70% since its all-time highs and is currently trading at $20,623.

With the fall in BTC’s price, the largest bitcoin investment vehicle – the Grayscale Bitcoin Trust (GBTC), also traded at its biggest ever discount to the spot market.

GBTC at a Heavy Discount

On-chain analytics site Coinglass shows that GBTC shares are down 34% versus BTC/USD on major exchanges as of June 17. The numbers for GBTC show that not just smaller investors but institutions have also failed to avoid the BTC downswing.

As the already underperforming GBTC hits new lows, bigger investors’ market sentiment comes out as heavily bearish. Amid the current market collapse, economist Peter Schiff compared BTC to Gold, pointing out that in May 2019 Grayscale launched its ‘drop gold campaign,’ pumping bitcoin’s price and the price of GBTC up to $17.40 at that time.

In May of 2019 #Grayscale launched its drop #gold campaign, pumping #Bitcoin and the price of $GBTC up to $17.40 the next month. Today GBTC hit $12.60, down 27.5% (78% below its high, at a 33% discount to NAV). Over the same 3 years gold is up over 30%. Any comment @BarrySilbert?

— Peter Schiff (@PeterSchiff) June 16, 2022

On June 16, GBTC hit $12.60 – 79% below its high, at a 34% discount to NAV. Schiff further added that ‘over the same three years while GBTC is down, gold is up by over 30%.’

At press time, GBTC premium traded at 34.26% cheaper than the Bitcoin spot price, also known as net asset value, or NAV. The drastic price loss accompanied a similar dip on spot markets as BTC/USD tested the lower $20,000 support twice.

GBTC is a financial vehicle that allows investors to invest in trusts that, in turn, hold large amounts of Bitcoin. While GBTC doesn’t mean BTC itself, as the price of bitcoin rises or falls, shares in these trusts tracking the value of the cryptocurrency are also affected.

Analyst Dylan LeClair commented on the discounted GBTC price, saying that ‘the lower the discount, the more GBTC siphons potential institutional demand away from the spot market.’

$GBTC -35.23% to net asset value.

Likely heading lower with a forced liquidation into an illiquid market from 3AC. pic.twitter.com/sHFynSe2Pg

— Dylan LeClair 🟠 (@DylanLeClair_) June 17, 2022

Many investors prefer investing in GBTC for several reasons, such as the fact that the Securities and Exchange Commission regulates investments in the asset.

Bitcoin Whales Activated

The largest cryptocurrency in the market has shed more than 70% of its value since hitting its all-time highs. With the total crypto market cap below the $1 trillion mark, it can only be imagined where the larger crypto market will be headed over the coming weeks.

Notably, the recent price downturn has severely affected mining profits as well as miners’ sentiments; however, one cohort is undeterred by the current market collapse – BTC whales.
According to data from the cryptocurrency analytics platform CryptoRank, mining Bitcoin is no longer profitable for miners.

CryptoRank data stated,

“Due to a significant drop in BTC price over the past months, mining has become less profitable. It might even be unprofitable for some bitcoin miners at the moment.”

As recessionary fears loom and organizations undergo operational problems and insolvencies, the larger market continues to move southward.

Nonetheless, data reveals that crypto whales have taken advantage of the chance to acquire bitcoin at a discounted price. Notably, when the top crypto asset came close to plunging below the critical support level of $20,000, BTC whales saw increased activity.

Crypto analyst by the name of Crypto Rover tweeted on June 15, ‘Bitcoin whales sell into strength and buy into weakness.’

PROOF: #Bitcoin whales sell into strength and buy into weakness. pic.twitter.com/PFhC75APy0

— Crypto Rover (@rovercrc) June 15, 2022