Huge outflows cause Grayscale Bitcoin Trust to sink to first discount to bitcoin since 2017 (GBTC)

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Summary List Placement
  • The Grayscale Bitcoin Trust plunged this week, with investors pulling cash at the fastest rate in almost a year.
  • It closed at a 3.77% discount on Thursday, a sharp reversal after trading at a hefty premium to bitcoin.
  • The bitcoin price itself has plunged around 20% this week, the biggest weekly drop since March 2020.
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The Grayscale Trust has plunged almost 20% this week, marking the biggest outflow from the world's largest bitcoin fund in close to a year and causing it to trade at a discount to its underlying assets for the first time since 2017.

Grayscale's closing price of $45.64 on Thursday meant the fund had fallen more than bitcoin itself over the week.

The trust closed at a 3.77% discount to the value of the assets it holds on Thursday, a sharp reversal after trading at hefty premiums as the bitcoin price soared in recent months. It is the first discount since March 2017, according to Bloomberg data.

Investors have pulled cash from the Grayscale Trust at a rapid rate over recent days as bitcoin has tumbled from a high of $58,000 on Sunday. The fund has a total of $32.83 billion in assets under management, according to Bloomberg.

The fall into discount territory highlights the extent to which investors have cooled on the fund this week. It traded at premiums above 15% for much of January as investors used the fund as a key way to gain exposure to bitcoin.

Bitcoin was down around 6% to $46,580 as of 5.45 a.m. ET on Friday. It had shed around 20% over the week, the worst decline since March last year, as investors balk at the sky-high price.

Market strategist and crypto skeptic Peter Schiff has raised concerns that the major outflows from the Grayscale Trust could mean a key player in the bitcoin world has to stop buying the cryptocurrency.

"If this persists, the Trust will have no more inflows and will therefore not be buying any more bitcoin," he tweeted.

Yet most bitcoin bulls are unconcerned about the recent drop. They argue it represents a good buying opportunity and predict that the price will continue to pull higher.

Katharine Wooller, managing director of UK digital asset exchange Dacxi, told Insider that corporate interest from the likes of Tesla should keep supporting bitcoin.

"Be warned however, bitcoin is known to significantly correct," she said. "Whilst the medium trend is positive for holders, it is both the sign of a healthy market and a buying opportunity."

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