Crypto is off to a hot start in 2023, and an embattled bitcoin fund gives investors a tool to squeeze more out of this rally, according to Ned Davis Research. Pat Tschosik, a senior portfolio strategist at the firm, said in a note to clients that the Grayscale Bitcoin Trust (GBTC) could give investors a 100% return by midyear. Bitcoin has rallied more than 25% to start the year and is trading above $20,000 again. The largest cryptocurrency appears to have broken out of its long slump, Tschosik said. "We believe Bitcoin has exited its 'winter' period of consolidation, which it appears to experience roughly every four years (2014, 2018, 2022)," the note said. BTC.CM= YTD mountain Bitcoin has rallied to start the new year. But the upside for Grayscale fund has to do not only with the outlook for bitcoin, but also the quirks of GBTC, namely the fact that its shares have been trading at a large discount to their net asset value for months. The discount means that the fund's shares are priced below the bitcoin holdings they represent. "We recommend GBTC ... as a way to play Bitcoin because it has a potential 'discount to NAV kicker' meaning not only would it rise if Bitcoin rises, but also from closing its current large 35% discount to NAV," the note said. The discount in the Grayscale fund, which is only available as an over-the-counter product, has emerged amid a series of crypto firm collapses that have caused some investors to lose confidence in the industry. One issue looming over the fund is that Genesis, a sister company of Grayscale, is preparing to file for bankruptcy, according to multiple reports. However, Tschosik pointed out that the NAV discount for the Grayscale fund has been closing in recent weeks after some activist investors got involved. "Investing in GBTC should be seen as a very high risk-reward proposition. We see 100% upside but also 33% downside," the note said. GBTC YTD mountain GBTC in 2023 One way for GBTC to close the discount would be to allow investors to withdraw their investment, Tschosik said. Grayscale does not offer a redemption program for the fund, meaning that investors can only exit their position by selling their shares to another investor. To be sure, the collapses of other high-profile crypto firms, such as FTX, have shown that the digital assets can fall sharply when a major player is forced to sell assets. GBTC reports more than $13 billion in assets under management, so if Grayscale allowed redemptions, a wave of withdrawals could potentially drive down the price of bitcoin. Grayscale is pushing to convert GBTC into an exchange-traded fund, which would be less likely to trade at a wide discount, but so far that has proven to be a dead end. There is currently no ETF that tracks spot bitcoin in the United States, and the Securities and Exchange Commission has repeatedly declined to allow those products from Grayscale and other firms. Grayscale has sued the SEC over the decision to reject its conversion plan.