Bitcoin selloff takes a bite out of cryptocurrency’s biggest fund

The Grayscale Bitcoin Trust free fall highlights the extent to which the latest leg of the retail-driven crypto craze is cooling.

Bitcoin’s worst selloff since December is dealing a particularly harsh blow to the biggest fund tracking the cryptocurrency. The $29.4 billion Grayscale Bitcoin Trust (ticker GBTC) has dropped about 20% so far this week, nearly double the decline in the world’s largest cryptocurrency. GBTC closed over 14% below the value of its underlying holdings on Wednesday as a result — a record discount, according to data compiled by Bloomberg. The dislocation has deepened despite Grayscale Investment LLC parent Digital Currency Group Inc.’s plans to purchase up to $250 million worth of GBTC shares. The GBTC free-fall highlights the extent to which the latest leg of the retail-driven crypto craze is cooling. The trust has persistently traded at a premium to its net asset value since launching, with investors willing to pay up for a piece of Bitcoin as it rockets higher. However, given that GBTC doesn’t allow redemptions — meaning that trust shares can only be created, not destroyed like in conventional funds — the number of shares outstanding has ballooned to a record 692 million. With Bitcoin’s price now stalling, that’s created a supply and demand imbalance as accredited investors in the trust seek to offload their shares in the secondary market