Cathie Wood’s ARK Invest is continuing to sell GBTC shares from the Grayscale Bitcoin Trust
ARK: sales in 2023 of the Grayscale Bitcoin Trust
After peaking in July 2021, they began selling in August of that year.
Actually, the biggest sales began almost simultaneously with the bursting of the speculative bubble, that is, in the second half of November 2021.
From February 2022 to January 2023 sales had almost stopped, but in 2023 they resumed.
So the sales in late 2021 and early 2022 were probably to cash in on the gains, after the speculative bubble burst, since most of the purchases were made between the second half of 2020 and early 202. The 2023 sales, on the other hand, must have been decided from different motivations.
Three sales campaigns occurred.
The first ended in May, and followed the rise of the BTC price at the beginning of the year.
The second began in August and ended in October, again during a rise in the price of Bitcoin.
The third, by far the most significant, began in late October and is still ongoing.
At the time of the peak, in July 2021, ARK Invest ETFs owned more than 9 million GBTC shares.
Before the bubble burst, at the end of November that year, they had already fallen to less than 8 million, and by February 2022 they had fallen to 6.2 million.
By May this year they had fallen to 5.3 million, and by mid-October they were still 5 million.
At present, however, they appear to have dropped as low as 4.3 million, or less than half of July 2021.
They recently reportedly sold 163,722 of them, grossing $5.02 million.
The only ARK ETF that owns shares in the Grayscale Bitcoin Trust is the ARKW Next Generation Internet ETF, within which GBTC now weighs only 9.24%, compared to Coinbase’s 10.42% and Roku’s 9.76%.
It is therefore a significant drain, particularly over the past 30 days.
Grayscale Bitcoin Trust’s recovery: ARK Invest takes advantage of it
On the other hand, the GBTC share price in the past 30 days has risen 18%.
This is curious because in the same period the price of BTC rose “only” 9%.
The fact is that since the victory against the SEC at the end of August, the discount on the NAV of the Grayscale Bitcoin Trust has been greatly reduced.
Suffice it to say that at the beginning of the year, GBTC’s total market capitalization was almost 50% less than the value of the BTC that the trust holds as collateral.
This discount to NAV by mid-June had risen to -43%, and it has done nothing but recover since then.
By early July it had rebounded to -26%, and by September even to -17%. In other words, at that point it had more than halved from the beginning of the year.
Last month it had rebounded to almost -11%, and now it is at -8%.
At this rate it may even fall to zero before the Grayscale Bitcoin Trust is finally converted into a full-fledged ETF on spot Bitcoin.
So for those who had bought GBTC shares when the price of BTC was lower, and the discount to NAV was greater, selling now means cashing in on significant gains.
If the price of Bitcoin is +125% since the beginning of the year, the share price of the Grayscale Bitcoin Trust is even 280% higher. This is more than double the gain, thus mainly due to the reduction in the discount to NAV.
It should be noted that it was since March 2021 that GBTC’s market capitalization was lower than the total market value of the BTC locked by the trust as collateral, while previously it had always been the other way around, ever since its launch in December 2018.
So anyone who bought GBTC shares before February 2021 in fact paid too much for them, while those who bought them from March 2021 onward paid too little.
ARK Invest bought them mostly before February 2021, but they also bought some between May and July of that year, when the discount to NAV was about -14%.
This makes it easier to understand why they sold GBTC shares both at the end of 2021 and during 2023, i.e., both when the price was at its highs and when the discount to NAV started to narrow.