The Grayscale Bitcoin Trust's (GBTC) early 2023 rally has outpaced that of its underlying bitcoin (BTC) holdings, thus significantly narrowing its discount to net asset value (NAV).

The closed-end trust with more than $10 billion in assets under management is up 17.5% to begin the year versus about a 5% advance in the price of bitcoin to its current $17,300. That's brought the GBTC discount to NAV down to about 38% – the narrowest in eight weeks – after having closed out 2022 at a 45% discount. The discount touched a record 50% in December.

The discount to NAV began 2022 in the 20% area, and prior to early 2021 it was the norm for several years for GBTC to trade at an often sizable premium to NAV.

Grayscale had applied to convert the GBTC into an exchange-traded fund that would theoretically provide a path for traders to arbitrage away the discount. However, the U.S. Securities and Exchange Commission rejected the proposal earlier this year.