Grayscale’s BTC Trust Trades At A Discount, What’s Happening?

Grayscale’s BTC trust trades at a discount and many analysts are wondering why is that the case? Well, in today’s BTC news we are trying to answer that question.

Grayscale’s BTC trust trades at a discount compared to its otherwise high premiums as the data from multiple sources shows. The product allows institutional and accredited investors to bet on the Bitcoin prices and to hold a small amount of BTC per share which are then traded on the open market or can be found on a subscription basis. The premium is charged to investors for the convenience and the security provided by the storing and custodian services of Grayscale compared to the ones of the unregulated exchanges.

In the past few days, the premium sunk downwards and attracted some scrutiny from the industry. Some considered the fall to be caused by huge investors cashing out their gains but Vijay Boyapati who is an influential Bitcoin proponent said that the falling premiums are actually because GBTC got a new competitor on the market with the US tech firm Microstrategy making huge purchases in the cryptocurrency. The company picked up over $1.6 billion worth of BTC in 2020 as Boypati said:

 “MicroStrategy ($MSTR) is a new way of getting exposure to #Bitcoin (because the company owns a lot of it) and MicroStrategy does not have a 2% yearly management fee like the Grayscale Trust.”

The Grayscale Trust owns bitcoins and issues shares in proportion to the bitcoins owned. The Net Asset Value (NAV) is the value of the bitcoins owned by the trust. Investors can then buy shares in the trust as a way of getting exposure to #Bitcoin's price movements

— Vijay Boyapati (@real_vijay) March 5, 2021

He added that the launched Skybridge Bitcoin Fund was another competing fund that is giving investors more exposure to Bitcoin without the need of buying an underlying asset:

 “Also, a Bitcoin ETF has been launched in Canada.”

Last year, there was only one way for US investors to purchase BTC and it was through Grayscale. However, the headstart is slowly fading out:

 “The increasing competition, high fees, and inability to arbitrage away premiums (or discounts) to NAV mean that GBTC is vulnerable to downswings in Bitcoin’s price where the rush for an easy way to get Bitcoin exposure diminishes.”

Grayscale's Bitcoin Trust (GBTC) has been a very common ways for institutions gets get exposure to #Bitcoin without having to think about custody or owning the underlying asset. It's currently trading as a steep discount to NAV (almost -12%). What does this mean? Thread time👇

— Vijay Boyapati (@real_vijay) March 5, 2021

The popular BTC investor noted that the “discount to NAV for GBTC” is becoming too deep for the Grayscale Trust if it is to become an exchange-traded fund where premiums and discounts to NAV can be easily arbitraged by traders:

 “Under the circumstance that GBTC becomes an ETF, those holding at a discount to its net assets would be getting a “free” 10% return vs just holding Bitcoin itself. This possibility creates some protection for the fund.”