GBTC is a bad tax deal

We know that GBTC accumulated significant unrealized capital gains over the years. In the in-kind redemption case, an ETF does not realize capital gains on redemption and that's a non-issue. Customers can delay the realization of capital gains until they sell the shares. However, since in-kind redemption is not allowed by SEC, those who want to redeem can only do it in cash. The tax implication is that the fund needs to sell BTC to get the cash for redemption, and the selling would realize capital gains. The fund would need to distribute their realized capital gains to customers at least annually. Therefore, if many redeem their shares, the remaining holders of GBTC would still be hit with a large amounts of capital gain tax bills despite themselves do not sell. And this problem would make buying GBTC a bad idea for new buyers even if GBTC ever drops the fee to par.

Other spot BTC ETPs would have similar problem in the future if they accumulate more capital gains. But currently the problem is most prominent for GBTC since other ETPs have a fresh start and not yet accumulate much capital gains.