‘Slam Dunk’ Bitcoin Arbitrage Fizzles for Biggest Crypto Fund
- Bitcoin gains 25% over past month, while GBTC advances 14%
- Arbitrage trade has been exploited so much: ProChain’s Tawil
One of the most popular arbitrage trades in cryptocurrencies is unraveling as the biggest Bitcoin fund’s once-hefty premium collapses.
The trade relies on the Grayscale Bitcoin Trust (ticker GBTC) trading at a premium to the value of the Bitcoin it holds -- a phenomenon caused in large part by investors paying up for access to the coin without having to buy it directly. When that happens, hedge funds swoop in to take advantage. They borrow Bitcoin, deposit the coins with GBTC in exchange for shares that are more valuable than the coins they bought, and they pocket that profit by selling the marked-up shares after a six-month lockup period expires. Thanks in part to the trade’s popularity, GBTC’s assets have swelled to over $35 billion from about $1.5 billion a year ago.