While bitcoin's (BTC) bear market has paused, the shares in Grayscale Investment's bitcoin trust (GBTC) have yet to find relief.

The discount in GBTC shares relative to the underlying cryptocurrency held in the fund widened to a record 36.2% on Sept. 30, according to data tracked by Delphi Digital. GBTC shares slipped into the discount category in February last year and have traded lower than the fund's net asset value (NAV) ever since.

The GBTC is one of the most widely tracked funds in the crypto market, as the trust has been the preferred venue for institutional investors to gain exposure to bitcoin without having to purchase or take custody of the cryptocurrency.

So, it's natural to assume that the continued widening of the GBTC discount stems predominantly from the absence of institutional demand. However, that's not necessarily true and persistent discount at least partly reflects the increasing availability of alternatives like exchange-traded funds (ETF).

"Some suggest that the increasing discount illustrates subsiding institutional interest in bitcoin, while others point to a wider offering of ETFs or alternative vehicles for BTC investment," Andrew Krohn, an analyst at crypto research firm Delphi Digital, wrote to clients on Monday.

Grayscale and CoinDesk are independent subsidiaries of the Digital Currency Group (DCG).

The Grayscale bitcoin trust is a close-ended fund, meaning BTC deposits remain locked forever. As of writing, the trust holds BTC 635,240, worth over $12 billion. That's roughly 3.3% of bitcoin's circulating supply.

Accredited investors can buy GBTC shares directly at the NAV by depositing bitcoin or U.S. dollars. The firm takes care of the custody and charges an annual management fee of 2% to investors. GBTC shares can be sold in the secondary market after a lock-in period of six months. So if prices fall within six months, all holders can do is sit and watch the value of their investment tank. The now-defunct crypto hedge fund Three Arrows Capital was one of the largest holders of GBTC.

The GBTC shares consistently traded at a premium before 2021. So, accredited investors purchased GBTC at NAV and sold those shares at a premium six months later, pocketing the difference. However, the so-called carry trade lost its shine once the premium flipped to discount in February 2021.

Besides, the launch of relatively cheaper ETFs in Canada, Europe and the U.S. later that year took away a significant chunk of demand from GBTC. While Grayscale doesn't allow redemptions and an ETF allows the market maker to create and redeem shares at will. So, traditional market funds and institutions prefer ETFs over close-ended funds like the Grayscale Bitcoin Trust.