Major Grayscale digital currency funds are trading at 34% to 69% discount to NAV

Published at: Dec. 8, 2022

According to statistics sourced from data aggregator YCharts, seven digital currency funds issued by asset manager Grayscale Investments are currently at a discount of 34% to 69% to their net asset value, or NAV. Holdings tracked in the analysis include the Grayscale Bitcoin Trust; Ethereum Trust, Ethereum Classic Trust, Litecoin Trust, ZCash Trust, Horizen Trust, Stellar Lumens Trust, and Livepeer Trust.

All of the funds track the performance of their namesake cryptocurrencies, with the Grayscale Stellar Lumens Trust having the lowest discount to NAV at 34% and the Grayscale Ethereum Classic Trust having the highest discount to NAV at 69%.

At the time of publication, the average discount to NAV shared by funds in the group stands at 50%. This is close to the discount value of the Grayscale Bitcoin Trust (GBTC), the largest holding with $10.6 billion in digital assets under management but only $5.59 billion in shares' net liquidation value. Meanwhile, the Grayscale Ethereum Trust, which holds $3.75 billion in Ether (ETH), is also trading at a discount of 50%.

Grayscale's investment vehicles have not been approved by the U.S. Securities and Exchange Commission (SEC) as exchange-traded funds (ETF) and thus trade over-the-counter (OTC). Previously, its funds such as GBTC traded at a premium during the crypto bull market due to heightened investor demand.

However, a series of setbacks appeared to have inversed the investor sentiment on its investment vehicles. First, the SEC rejected the firm's application to list GBTC as an ETF on June 29, citing that the proposal failed to demonstrate how it was "designed to prevent fraudulent and manipulative acts and practices." Grayscale responded with a lawsuit against the SEC that is ongoing. The firm's legal officer estimated that the litigation could take up to two years.

Second, Grayscale's parent Digital Currency Group has been hit with insolvency rumors amidst the crypto winter, especially after its subsidiary Genesis Global paused withdrawals on Nov. 16, citing "unprecedented market turmoil" related to the collapse of troubled cryptocurrency exchange FTX.

Finally, Grayscale stopped short of a full on-chain disclosure, citing security concerns, in response to users' inquiry for a proof-of-reserves audit. The firm instead shared a letter from Coinbase Custody attesting the value of its holdings. All together, Grayscale currently has $14.7 billion worth of digital currencies under management in its OTC funds.