Publicly listed bitcoin-related funds have seen both their share prices and asset under management plummet, in line with the mayhem of digital assets.
“Investors have significantly reduced their exposure to risk assets and remain risk averse for the moment as inflation remains high and central banks continue tightening,” analysts at Kaiko wrote in a Monday report.
Grayscale Bitcoin Trust GBTC, +2.69%, the world’s largest bitcoin fund, has lost about 67% of its value year-to-date, underperforming bitcoin, which fell about 59% in the same stretch, according to FactSet data.
Meanwhile, the fund’s shares were trading at a record discount of 37% to net asset value, or its underlying bitcoin holdings. GBTC is a closed-end fund, where accredited investors can buy shares based on net asset value, and sell them in the secondary market after a six-month lockup period.
GBTC was launched in 2013. Its shares previously traded at a premium of up to 41% above net asset value, but since February 2021 have been trading at a discount. Plunging crypto values since roughly November have been a factor in the decline of the fund’s assets under management, which went down by almost 60% to about $12.2 billion as of Monday from $30 billion at the beginning of the year.
The decline might also be partly attributed to increasing competition from other funds, as several bitcoin futures-backed exchange-traded funds, or ETF, were launched in the U.S. and other countries. What’s more, the U.S. Securities and Exchange Commission rejected Grayscale’s application to convert GBTC into a spot bitcoin ETF, which would have allowed investors to redeem shares at net asset value.
Meanwhile, ProShares Bitcoin Strategy BITO, +2.12%, the first bitcoin futures-based ETF in the U.S., dropped 58% year-to-date, according to FactSet data. Its asset under management tumbled to $623 million on Monday from $1.2 billion at the start of the year.
“BITO, the first bitcoin-linked ETF in the United States, has demonstrated its ability to closely track spot bitcoin, despite an extremely volatile period for stocks, bonds, and digital assets during its first year since inception,” a representative at ProShares wrote to MarketWatch via email.
Valkyrie Bitcoin Strategy ETF BTF, +2.04% lost 58% year-to-date, and VanEck Bitcoin Strategy ETF XBTF, +2.00% declined 58% over the same period.
Spokespeople for Grayscale, Valkyrie and VanEck didn’t immediately respond to requests for comments.