Cathie Wood’s Ark Invest Raises Another $1.4M in Grayscale Bitcoin Trust

by James · November 22, 2022

Cathie Wood’s Ark Invest Raises Another .4M in Grayscale Bitcoin Trust

Ark Invest, the investment firm led by Cathie Wood, has bought an additional 176,945 shares worth about $1.4 million in Grayscale’s Bitcoin Trust (GBTC) fund, according to an investor email seen by Decrypt.

This is the firm’s second major GBTC purchase in as many weeks.

In accordance Bloombergthe Florida-based investment fund bought nearly 315,000 GBTC shares for a total of $2.8 million last week.

Sheet now almost lasts 6.357 million GBTC shares which represents 0.4% of the company’s total investments.

A purple and a gold line showing the value of two calculations. — Ark Invest’s GBTC holdings over time. Source: Ark Invest.

Ark buys in despite GBTC concerns

GBTC is a financial vehicle that allows investors to gain exposure to Bitcoin without having to buy and hold the asset. The Bitcoin support GBTC is detained by Coinbase.

Following collapse of FTXmajor centralized cryptocurrency exchanges have revealed their client fund reserves to regain user trust.

Grayscale, however, refrained from disclosing details of GBTC’s Bitcoin support, citing “security reasons.”

6) Coinbase often performs on-chain validation. Due to security concerns, we do not make such wallet information and confirmation information publicly available through a cryptographic reservation certificate or other advanced cryptographic accounting procedure.

— Grayscale (@grayscale) 18 November 2022

This move created chaos among cryptocurrency investors around GBTC’s liquidity, widening the infamous discount.

Per Grayscale’s latest announcementthe company’s underlying GBTC is valued at $9.9 billion, reflecting a holding per share (GBTC) of $14.43.

But the market price of GBTC is around $8.28, a whopping 42.6% discount from the underlying Bitcoin value. Last Friday, the GBTC discount reached an all-time high of 45.08%, according to data from Ycharts. This means that GBTC shares are trading for less than the net worth of Bitcoin.

A purple chart that moves down and to the right. — *Grayscale Bitcoin Trust Discount. Source:* *Ycharts*.

GBTC discount is nothing new. Since February 2021, shares of GBTC have traded at a discount to the underlying asset.

One of the main reasons this discount has emerged is because there is currently no mechanism to redeem the underlying asset. If that were the case, it would be easy for arbitrageurs to buy the discounted asset and redeem it for Bitcoin to make a profit.

Instead, the only option is to sell the shares, a market force fueled by the industry’s ongoing liquidity crisis.