The grandfather of all bitcoin structured products, the hugely popular Grayscale Bitcoin Trust, has seen its discount to NAV plunge to almost -50% from about 0% in the beginning of 2021 as bitcoin has fallen in price.

In other words, if you want to buy bitcoin, and you trust that Grayscale's assets are safe and sound, buying their trust here would essentially allow you to buy bitcoin for an additional 50% off its spot price.

It sounds too good to be true, right? That's what many skeptics continue to point out. Why would the trust trade at such a massive discount? Could it be due to a reasonable explanation? Perhaps its just a technical glitch as many people are selling at any price do to the volatility in the space right now? Perhaps it is due to forced liquidations of people who held GBTC, opening the door for opportunities to those who have cash on the sidelines?

The truth is we just don't really know. But…the simplest way for Grayscale to close the price/NAV gap would be to reassure investors that its trust's holdings are exactly as they seem, making the case easy for arbitrageurs to pounce on what could be a significant discount not just if the price of bitcoin rises, but even if it falls less than the current discount but Grayscale is somehow able to shore up the difference.

As of yesterday, the Grayscale Bitcoin Trust was trading at a massive 43% discount to its NAV, Peter Schiff, who has traded barbs with Grayscale CEO Barry Silbert on Twitter often, noted:

Today the #Grayscale Bitcoin Trust traded at a 43% discount to its NAV. With #Bitcoin trading at $16,700, shareholders of $GBTC were willing to sell their Bitcoin for the equivalent of $9,500. What does that tell you about retail and institutional investor confidence in Bitcoin?