Grayscale's leading digital currency funds trade at a 34% to 69% discount to NAV
According to statistics from data aggregator YCharts, seven digital currency funds issued by asset manager Grayscale Investments are currently at a 34% to 69% discount to their NAV. The holdings analyzed include Grayscale Bitcoin Trust, Ethereum Trust, Ethereum Classic Trust, Litecoin Trust, ZCash Trust, Horizen Trust, Stellar Lumens Trust and Livepeer Trust.
The bitcoin
All funds track the performance of their namesake cryptocurrencies, with the Grayscale Stellar Lumens Trust having the smallest discount to NAV at 34% and the Grayscale Ethereum Classic Trust having the largest discount to NAV at 69%.
At the time of publication, the average discount to NAV shared by the group's funds stands at 50%. This figure is close to the discount value of Grayscale Bitcoin Trust (GBTC), the largest fund with USD 10.6 billion in digital assets under management, but only USD 5.59 billion in net equity settlement value. Meanwhile, the Grayscale Ethereum Trust, which holds USD 3.75 billion in Ether (ETH), also trades at a 50% discount.
Grayscale's investment vehicles have not been approved by the U.S. Securities and Exchange Commission (SEC) as exchange-traded funds (ETFs), so they are traded over-the-counter (OTC). Previously, its funds, such as GBTC, traded at a premium during the cryptocurrency bull market due to high investor demand.
However, a series of setbacks seems to have reversed investor confidence in its investment vehicles. First, the SEC rejected the company's application to list GBTC as an ETF on June 29, claiming the proposal failed to demonstrate how it was "designed to prevent fraudulent and manipulative acts and practices." Grayscale responded with a lawsuit against the SEC that is ongoing. The company's legal officer estimated that the litigation could take up to two years.
Second, Grayscale's parent company, Digital Currency Group, has been hit by insolvency rumors in the midst of the cryptowinter, especially after its subsidiary Genesis Global put withdrawals on hold on Nov. 16, citing "unprecedented market turmoil" related to the collapse of troubled cryptocurrency exchange FTX.
Finally, Grayscale stopped short of disclosing all on-chain information, citing security concerns, in response to users' request for an audit of proof of reserves. Instead, the company shared a letter from Coinbase Custody certifying the value of its holdings. In total, Grayscale currently manages USD 14.7 billion in digital currencies in its OTC funds.
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