Crypto investment firm Digital Currency Group has bought $388 million worth of GBTC shares as of October 19, according to a release today. The company has also increased its authorization to buy more shares from $750 million to $1 billion.
This comes two days after the discount on the Grayscale Bitcoin Trust fell to nearly its lowest point, at -20.5%. This means that the price of shares in the fund are 20% lower than the value of the underlying bitcoin represented by each share. Part of the reason behind the discount is that shares cannot be redeemed for the underlying bitcoin.
After GBTC started trading at a discount, the amount of bitcoin flowing into the fund came to an abrupt halt. GBTC's holdings have been essentially flat since February (declining gently due to fees).
Over the long term, Grayscale is planning to fix this by turning the fund into a bitcoin ETF. But to do so requires SEC approval. While the SEC has allowed the first U.S. bitcoin ETF to launch, it's based on bitcoin futures rather than spot — and the SEC hasn't yet expressed intent to let a spot-based ETF go live.
In the short term, DCG — which owns Grayscale — is helping to supply some demand, which may go some way to counteract the discount. By the end of April, the company had bought $193.5 million worth of GBTC and expanded its limit to $750 million. Today's announcement confirms it has bought an additional $194.5 million worth of GBTC since then.