Bitcoin Investment Trust Struggles Because of Falling Cryptocurrency Prices

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Wed, 10/03/2018 - 07:36
Alex Dovbnya
Meanwhile, a recent sharp drop of GBTC’s premium suggests that investors might be losing interest in Bitcoin
Bitcoin Investment Trust Struggles Because of Falling Cryptocurrency Prices
Cover image via U.Today

Grayscale Bitcoin Investment Trust (GBTC), the only investment trust, is suffering from the prolonging market downtrend, Bloomberg reports. GBTC shares took a nosedive, falling by a whopping 80 percent since December. Meanwhile, Bitcoin price fell by 66 percent compared to its all-time high.

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High management fees are the problem

GBTC’s downfall, according to some investors, may be inextricably connected to its hefty expense fee, which reaches 2 percent. In sharp contrast to this, the SPDR Gold ETF has a 0.04 percent expense ratio. British market analyst Naeem Aslam claims that the GBTC expense ratio is “insane”, but the falling Bitcoin price makes it only worse. At the same time, managers of GBTC claim that such high fees serve as a safeguarding measure in the Bitcoin markets.

GBTC premium hits a snag

In a single week, the premium on GBTC fell by 10 percent, which further proves that the $2 bln is currently losing its luster. On Oct. 1, Lucid Investment’s Tyler Jenks took to Twitter to explain what this drop could actually mean. He claims that the crypto community can expect of these two scenarios: another major bearish trend or a new Bitcoin ETF. Basically, he means that either investors are not keen on Bitcoin anymore or they have found an alternative in the likes of the Swiss startup Seba that strives to create a crypto bank.

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About the author

Alex Dovbnya (aka AlexMorris) is a cryptocurrency expert, trader and journalist with extensive experience of covering everything related to the burgeoning industry — from price analysis to Blockchain disruption. Alex authored more than 1,000 stories for U.Today, CryptoComes and other fintech media outlets. He’s particularly interested in regulatory trends around the globe that are shaping the future of digital assets, can be contacted at alex.dovbnya@u.today.