The collapse of FTX sent shockwaves across the digital asset industry, but now, attention has shifted to Grayscale Bitcoin Trust (GBTC), where the discount has widened to an unprecedented 46%. This means investors in the trust have lost 83% of their value since Bitcoin peaked in November 2021—surpassing even Bitcoin’s own 74% decline during the same period.
This historic discount raises urgent questions: Is GBTC on the brink of a crisis? Can it survive in today’s evolving crypto investment landscape? And what does this mean for the future of regulated Bitcoin exposure in the U.S.?
What Is Grayscale Bitcoin Trust (GBTC)?
Grayscale Investments manages the world’s largest Bitcoin trust, GBTC, offering institutional and retail investors a way to gain exposure to Bitcoin without directly owning or storing the cryptocurrency.
Similar to traditional financial instruments like the SPDR Gold Trust, GBTC holds actual Bitcoin and trades over-the-counter (OTCQX) as a publicly available security. This structure made it a pioneering product when launched in 2013—especially during a time when direct crypto access was limited or risky for many investors.
👉 Discover how institutional crypto investment is evolving in 2025.
The Scale of GBTC’s Holdings
Grayscale’s influence in the crypto market is significant due to its massive holdings:
- 673,000 BTC, representing approximately 3.5% of all circulating Bitcoin. The trust’s total value has dropped from $13.5 billion two weeks ago to **$10.6 billion**.
- 3 million ETH, valued at $3.6 billion (down from $4.8 billion).
- Over 106,000 additional tokens, with combined value falling from $3.9 million to $1.4 million.
These numbers reflect not just market depreciation but also growing investor skepticism about GBTC’s long-term viability.
Historical Performance: A Pattern of Deep Drawdowns
GBTC has consistently underperformed during bear markets:
- 2018 Bear Market: The trust plunged 90.5% over 13 months before finding a bottom.
- 2022–2025 Bear Cycle: GBTC is down 85% and remains in a sustained downtrend.
While Bitcoin itself has shown resilience and recovery potential, GBTC’s structural flaws have amplified losses for shareholders.
Why Is GBTC Trading at a Record Discount?
The core issue lies in structure and liquidity. Unlike exchange-traded funds (ETFs), GBTC does not allow redemption of shares for underlying Bitcoin or cash. This absence of a redemption or arbitrage mechanism creates a fundamental imbalance:
- When demand falls, shares can’t be redeemed to reduce supply.
- New shares can only be issued through authorized participants, but without a two-way market, supply accumulates while demand weakens.
- The result? A widening gap between GBTC’s market price and its net asset value (NAV)—now at -46%.
Compare this to Canada’s first Bitcoin ETF, launched in 2021, which charges less than 1% in fees—half of GBTC’s 2% annual fee—and offers real-time trading and full liquidity. It’s no surprise that capital has flowed out of GBTC and into more efficient vehicles.
The DCG Connection: Genesis and Regulatory Risks
Grayscale is part of Digital Currency Group (DCG), a Connecticut-based venture firm that also owns Genesis Trading—a major crypto lending and trading platform.
Recent turbulence at Genesis has intensified scrutiny on Grayscale:
- Genesis halted redemptions and new loan issuance amid liquidity strains.
- As a former authorized participant for GBTC, its instability raises concerns about Grayscale’s operational resilience.
- DCG itself is the largest shareholder in GBTC, holding 4.1% (28.2 million shares).
While Grayscale launched its own broker-dealer, Grayscale Securities, to reduce reliance on third parties, the shadow of interconnected risk remains.
The ETF Conversion Battle: Grayscale vs. SEC
Grayscale’s long-term survival hinges on one goal: converting GBTC into a spot Bitcoin ETF.
Such a move would enable:
- Creation and redemption of shares.
- Real-time arbitrage to keep price aligned with NAV.
- Improved liquidity and investor confidence.
But the U.S. Securities and Exchange Commission (SEC) has repeatedly blocked the application, citing concerns over market manipulation on unregulated crypto exchanges—despite approvals in Canada, Europe, and other jurisdictions.
Grayscale is currently suing the SEC to force approval. While legal experts are divided on the outcome, the record discount suggests most market participants don’t expect a near-term win.
“If they win, the discount would collapse overnight. Arbitrage would kick in, and GBTC could trade at par with its assets,” says Todd Rosenbluth, head of research at VettaFi.
Yet Nate Geraci, president of The ETF Store, criticizes the current state:
“It’s absurd that the SEC allows retail investors to use a flawed product like GBTC but won’t approve a spot Bitcoin ETF that would fix the very problems they claim to worry about.”
👉 See how spot Bitcoin ETFs are reshaping global crypto markets.
Investor Sentiment: Divided but Not Dead
Despite the gloom, some major players still see value:
- Ark Investment Management, led by Cathie Wood (“Woodie”), is GBTC’s third-largest shareholder with nearly 1% ownership.
- This week, Ark bought an additional $2.8 million in shares, betting on a potential ETF conversion.
- Wood has called GBTC’s current price a “fire sale” opportunity if regulatory approval comes through.
Meanwhile, BlockFi—GBTC’s second-largest holder with 2.9%—is itself under stress due to its exposure to FTX and has suspended withdrawals.
Could Grayscale Buy Back Shares?
One potential solution: Grayscale could seek SEC approval to launch a share repurchase program.
Peter Tchir, macro strategist at Academy Securities, suggests this could:
- Reduce outstanding shares.
- Narrow the discount.
- Generate goodwill with investors.
- Possibly offset lost fee income by attracting new capital.
However, without structural reform or ETF approval, buybacks may only offer temporary relief.
FAQs: Your GBTC Questions Answered
Q: Why is GBTC trading below its net asset value?
A: Because there’s no mechanism to redeem shares for Bitcoin. When demand drops, prices fall without correction—leading to deep discounts.
Q: Is my Bitcoin safe in GBTC?
A: Yes. Grayscale holds real Bitcoin in cold storage. Unlike FTX, it doesn’t lend or rehypothecate assets. The underlying BTC is secure.
Q: Can the discount get worse?
A: Yes. If crypto market stress continues or confidence in DCG weakens further, the discount could expand beyond 50%.
Q: What happens if Grayscale wins its SEC lawsuit?
A: The trust could convert to a spot ETF, enabling redemptions and arbitrage. The discount would likely vanish quickly, benefiting existing shareholders.
Q: Should I invest in GBTC now?
A: It’s speculative. The deep discount offers potential upside if an ETF conversion happens. But without regulatory progress, it remains a high-risk vehicle.
Q: How does GBTC compare to holding Bitcoin directly?
A: Less efficient. You pay higher fees, face liquidity issues, and lack control over private keys. But it offers regulated exposure for those avoiding direct custody.
👉 Learn how to evaluate crypto investment risks like a pro.
Final Thoughts: A Regulatory Crossroads
The record discount in GBTC isn’t just a financial anomaly—it’s a symptom of broader regulatory stagnation in the U.S. crypto market.
While FTX’s collapse highlighted the dangers of unregulated exchanges, it also underscored the need for safe, transparent alternatives like spot Bitcoin ETFs.
Grayscale’s struggle reflects a paradox: American investors are allowed to use a broken product (GBTC), but not granted access to better ones approved elsewhere.
As legal battles continue and market pressure mounts, 2025 could be the year the U.S. finally rethinks its stance—or falls further behind in the global race for crypto innovation.
Core Keywords: Grayscale Bitcoin Trust, GBTC discount, spot Bitcoin ETF, cryptocurrency regulation, Bitcoin investment, SEC lawsuit, DCG Genesis, crypto market crash