GBTC Premium Plummets To -19% As Competition Weighs In

The GBTC premium plummets to -19% as for the past two months we saw the GBTC trading a negative premium to net asset value. Historically, the GBTC traded at a high, averaging a 15% premium since the fund’s inception but let’s first read more in our latest cryptocurrency news today.

This was mainly because to the GBTC being the only investment vehicle that is accessible to institutional investors. Back on Thursday, we saw the GBTC premium plummet to a new all-time low of -18.92% and with the Canadian competitors taking up the market share, we also saw ETFs on the cusp of approval and a drying up demand for the institutional investment products of Grayscale.

Canada’s Purpose Bitcoin ETF for example reached $1.4 billion assets under management when BTC surged to a an all-time high at the start of the month. Despite being dwarfed by the GBTC larger AUM of $32 billion, the Canadian fund’s trajectory since inception is still impressive. The US Securities Exchange Commission started a review of the two US BTC ETFs as well. A huge part of the grayscale losing the market dominance is due to the high management fees and with an annual rate of 2%, it’s not possible to keep up with the growing competition.

The three available Bitcoin ETFs in Canada, CI Galaxy, Evoleve and Purpose, offer competitive expense ratios of 1%, 0.75% and 0.40% and more likely than not, their US Counterparts offer similar competitive fees when approved. This difficult disadvantage is evident via the GBTC fund flow as it is measured by amount of Bitcoin flowing in our out of the trust which is a metric that can give insight into both investor demand and market conditions.

Interestingly enough, when the Grayscale premium started collapsing into late February, the fund continued dropping its holdings in what seems to be a scheduled selling. According to an on-chain analytics site Glassnode, GBTC sold more than 2000 BTC which are worth about $105 million with current prices hovering at $52,700. In the same timeframe, Purpose Investmetns acquired more than 8000 BTC thanks to the surging demand. At the start of April, Grayscale investments announced plans to transform GBTC into an ETF because of lower management fees and improved fund structure. With so much uncertainty still, the potential investors should continue treading lightly.