GBTC [0] has been trading since March 2015 [1], as of today is up 714% since inception [2]. My understanding is that nothing serious has gone wrong, so far, in nearly two years.
Also, for some, "ridiculous volatility" is a desirable feature for some portion of their portfolio.
[0] https://grayscale.co/bitcoin-investment-trust/ [1] http://www.investopedia.com/articles/investing/073015/bitcoi... [2] https://grayscale.co/bitcoin-investment-trust/#market-perfor...
GBTC is a bad way to trade bitcoin and the chart in reference [2] you posted shows exactly why. A good BTC tracking ETF would have NAV = market cap, but here you can see that NAV and market cap are unlinked (as are returns for GBTC vs bitcoin) and people are generally paying way over NAV (in some cases over 50%!) to own GBTC. This is presumably due to unsophisticated traders buying GBTC without understanding that they're getting a terrible deal.
In summary, yes something is seriously wrong with GBTC and has been wrong for the entire life of the product.
To clarify, I'm not saying I'd touch GBTC. I certainly would not ever buy it. Nor would I consider buying any ETF or ETN claiming exposure to Bitcoin. I have no desire to shoulder such substantial counterparty risk, fees, and tracking risk (among many other issues, these are simply my top three).
I agree that GBTC is a terrible way to trade Bitcoin. Same as how many other ETFs, ETNs, mutual funds, and other financially engineered products are fantastically terrible ways to gain exposure to various assets. They apparently meet some people's needs, though. I don't understand it, but so what? I don't judge. Good for them.
Unlinked is putting it mildly. The gigantic rally in bitcoin after the drawdown in January was almost entirely missed by GBTC. For example if you bought on 01/11/17 and sold on 02/02/17, instead of enjoying the 29% gains of bitcoin (~$778 to ~$1004), you were treated to a loss of 1% ($109.50 to $108.50).