It’s because someone could short (borrow) GBTC and redeem it for BTC for an immediate profit. The premium would disappear near instantaneously as short sellers captured the spread.
Why would you redeem it for BTC instead of selling it on the stock market? If you sell it on the market you get 10%-50% more than if you redeem it then sell the bitcoins.
Also, I don't see how shorting gives you immediate profit. You still have to give back the stock later (you're in debt). If the stock goes up, you lose. If the stock goes down, you gain. I don't see how it's immediate profit.
GBTC is a form of "locked bitcoin," and it currently trades at a discount to the equivalent amount of ordinary bitcoin. If redemption were possible, the profitable arbitrage trade would be:
1. Use cash to buy Y GBTC at $X
2. Redeem those GBTC for Y bitcoin.
3. Sell those bitcoin for $Z > $X
Short selling isn't necessary, but it would sidestep the "use cash" part of step 1.
This trade is not currently possible because GBTC does not allow people to trade in GBTC shares for the equivalent bitcoin.
Also, I don't see how shorting gives you immediate profit. You still have to give back the stock later (you're in debt). If the stock goes up, you lose. If the stock goes down, you gain. I don't see how it's immediate profit.