Grayscale Bitcoin Trust ($GBTC) is currently the largest listed cryptocurrency asset with $30.17 billion in assets under management. The firm currently holds more than 655,730 BTC and the security is tradable in the United States through over-the-counter markets.
How is GBTC different from a Bitcoin ETF?
The fund was launched in 2013 and the Grayscale Bitcoin Trust became the preferred institutional vehicle in the U.S. for BTC due to the lack of a Bitcoin exchange-traded fund (ETF).
Investment trust funds are regulated by the U.S. Office of the Comptroller of the Currency (OCC) and they are designed exclusively for accredited investors. Nevertheless, those can be sold to retail traders after a six-month lock-up period.
This specificity causes GBTC shares to trade above the equivalent BTC held by the trust whenever there’s retail demand on secondary markets. Meanwhile, institutional clients can buy at par directly from Grayscale Investments regardless of the price on OTC markets.
As displayed above, such a premium sometimes surpassed 40%, indicating heavy buying pressure from retail investors. The situation changed over the past four weeks as Bitcoin price peaked at $58,000 and initiated a substantial correction, causing the GBTC premium to range between 5% and 10%.
A diminished appetite in the secondary markets creates a potential imbalance as there is currently no redemption program for the GBTC. Had there been a way to convert it back to BTC, a market maker would gladly buy the trust shares at a discount.
Although the recent price crash could explain the 7% discount seen on Feb. 26, Bitcoin faced multiple 30% corrections in the past with no apparent impact on GBTC premium. Even during the horrific bear market in late 2018, GBTC traded above the net asset value (NAV).
A new challenger appears
Although no better alternative was previously offered, Canada’s TSX launched a Bitcoin ETF on Feb. 18, providing investors direct exposure to BTC. This structure allows the market maker to create and redeem shares, thus minimizing eventual premium or discount to the net asset value.
This time around, the selling pressure that took place found less buying activity from non-accredited investors. On the other hand, the Canadian Purpose Investments ETF surpassed 10,000 BTC under management in one week, which signals the instrument’s success despite a sharp downturn in BTC price.
Unless Grayscale Investments opens a redemption program, nothing is preventing GBTC from continuing to trade below its net asset value.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Bitcoin Will Significantly Underperform Altcoin Market As New Crypto Price Era Unfolds: Pantera Capital’s Dan Morehead
The founder and chief executive officer of Pantera Capital says that investors can expect altcoins to outperform Bitcoin (BTC) in the long term.
In a recent edition of Pantera’s Blockchain Letter, the head of the digital asset management firm outlines Dan Morehead’s key quotes from the SALT 2021 conference in New York. During the conference, Morehead said that even though his company has greatly profited from BTC, he emphasized that most future crypto gains will come from altcoin investments.ADVERTISEMENT
“My perspective is: Bitcoin has been amazing – Pantera Bitcoin Fund is up 67,000% since inception. However, I think the majority of future gains will be from tokens outside of Bitcoin. I know that sounds heretical to some people here, but that’s my professional opinion.”
Morehead compares the rise of Bitcoin and its competitors to that of the tech industry boom during the late 1990s.
“It’s like saying in 1998 that [the] majority of future tech gains would come from outside Microsoft.
At the time, Microsoft was worth $218 billion, Apple $3.5 billion, Amazon was $2.2 billion. Google and Facebook were zero – they didn’t even exist. In the years since Microsoft did great – it went up 10x. However, 80% of the tech gains in these five stocks came from outside Microsoft.
That’s the view I have here – I think BTC is going to go up a ton – like 10x. It’s a great investment…[but] I think the broader portfolio is going to outperform.”
At time of writing, BTC has a market cap of $1.156 trillion while all altcoins combined have a market cap of $1.327 trillion, according to CoinMarketCap.
s are now selling ‘way more’ US Dollars to buy Bitcoin
President Nayib Bukele shared this new development on Twitter based on the data acquired from El Salvador’s in-house wallet service, Chivo. President Bukele said:
“People are inserting way more USD (to buy #BTC) than what they are withdrawing from the Chivo ATMs.”
He also urged media outlets to independently confirm the above information by visiting the ATMs. President Bukele further stated that Chivo has reported 24,076 remittance requests “adding up to $3,069,761.05 in one day.”
2 new Chivo Facts:
1. People are inserting way more USD (to buy #BTC) than what they are withdrawing from the Chivo ATMs (any media outlet can independently confirm this by visiting the ATMs).
2. Today, we received 24,076 remittances, adding up to $3,069,761.05 (in one day).— Nayib Bukele 🇸🇻 (@nayibbukele) October 16, 2021
The increase in USD to Bitcoin conversions within the jurisdiction reflects a change in investor sentiment, which initially faced resistance during adoption from the general public. Moreover, the Salvadorean government offers various subsidies for using Bitcoin such as fuel subsidies and tax exemptions.
El Salvador has installed over 200 ATMs after adopting Bitcoin as a legal tender, making it the third-largest network of crypto ATMs after the United States and Canada.
A Cointelegraph report shows that El Salvador exceeded United Kingdom’s crypto ATM count after deploying 205 crypto ATMs, mainly to facilitate local Bitcoin transactions and Bitcoin to U.S. dollars conversions.
Recently, the Salvadorean government announced to build a $4 million veterinary hospital using the profits attained during the Bitcoin bull market. According to President Bukele, the veterinary hospital will host four operating rooms, four emergency clinics, 19 offices, and a rehabilitation area: “We decided to invest a part of that money in this: a veterinary hospital for our furry friends.”
Why Bitcoin ETF Is Such A Big Deal and May Push Bitcoin Above $100k?
Amid a global regulatory crackdown on cryptocurrencies, the U.S. SEC’s approval of a Bitcoin (BTC) Exchange-Traded Fund (ETF) has come as a pleasant surprise to the Bitcoin community. The most awaited ProShares Bitcoin Strategy ETF is reportedly launching as early as Monday, October 18. This ETF is going to be traded with a ticker symbol of BITO and will track Bitcoin futures.
Bitcoin rallies towards $100K
Instead of achieving regulatory green light, Bitcoin price crossed $62K this morning with a slight correction, BTC continued to stand strong at $61.5K, at the time of reporting. The market is raging with speculation of Bitcoin crossing $100K with this ETF. The timing could not have been better as the fourth quarter has commenced the holiday season bull run, with trader bonuses flooding in as cryptocurrencies take to an upward graph. Since the beginning of October, when the potential BTC ETF began gaining mass traction, the impact on Bitcoin prices also became evident.
According to a Bloomberg report, this Bitcoin ETF will further the institutional adoption of the decentralized sphere, specifically focused on Bitcoin. “An ETF should provide greater ease-of-use for retail investors looking to ride Bitcoin’s often hair-raising ups and downs. Like securities tracking oil and gold, it will change hands on relatively familiar U.S. stock-market venues, rather than in cryptocurrency or futures exchanges whose workings are imposing to some users.”
Regulatory approval can make or break a token
The frequently validated fact that regulatory approval radically helps the growth of cryptocurrencies, despite it being a decentralized and unregulated market, continues to gain credibility. XRP is one of the most prominent examples of how drowning in a regulatory puddle may keep certain tokens into a bear rut, while the rest of the industry leaps into the bullish phase. Due to the ongoing XRP lawsuit against Ripple, the XRP community continues to suffer as the fourth quarter has not helped XRP so far. The community blames the SEC for stretching the lawsuit intentionally so that XRP skips this bull run.