Grayscale Investment’s GBTC premium, which first turned negative on February 23, continues its downtrend. As the latest Glassnode data shows, the GBTC traded at a record low of -11.92% on March 4, 2021. According to the same data, this new low is a significant reversal from the December 21st premium of nearly 40%.
The competition
This growth in the discount on GBTC is due to Grayscale Investments gradually shifting focus to altcoins. As reported by news.Bitcoin.com, Grayscale added 174,000 Litecoins, or nearly 80% of the newly minted LTC, in February 2021. Similarly, the investment company added 243,000 ETH to its Ethereum holdings over the same period.
However, it is the discount on the GBTC that has sparked a debate about what this could mean for owners of the investment product. Some have pointed to the creation of the Purpose Bitcoin ETF as the main reason for extending the discount to the GBTC. After its inception on February 18, the ETF had amassed 11,141,2363 bitcoins by March 2. Meanwhile, analysts at financial services giant JP Morgan share the same sentiment. Aside from citing increasing competition, analysts believe that “posting profit” is the other reason the premium on GBTC has disappeared.
In the meantime, that scenario won’t last forever, Thetie.io founder and CEO Josh Frank told news.Bitcoin.com.
“This discount won’t last forever as investors can take advantage of the bitcoin discount they can hold in their retirement accounts,” the founder said.
There has always been a bonus
In the meantime, according to Frank, who had previously explained in a Twitter thread why the premium existed on GBTC, the institutes “got into GBTC to determine the difference between the lending rate and the premium”. And, as the CEO notes, this deal has “worked for a long time as retailers have consistently paid a premium for GBTC to get involved in their retirement accounts.”
However, with GBTC not allowing investors to redeem shares for underlying Bitcoin stocks, and “as more investors arbitrage the premium, the amount of Bitcoin held in GBTC skyrocketed, exceeding demand for GBTC through retail. “
In the meantime, the CEO suggests that Grayscale need to make some changes, most notably to the 2% annual management fee. Frank said:
I think Grayscale needs to respond by allowing investors to return shares for underlying BTC or the management fee needs to go down.
Meanwhile, some crypto enthusiasts on Twitter agreed with the narrative that increasing competition may be the main reason the premium on GBTC has turned negative.
Premium or Discount
However, others believe the discount will not affect Grayscale’s ability to benefit from offloading the BTC. For example, a Twitter user using the name Sandwich Toaster claims that after buying the BTC, Grayscale can sell between $ 20,000 and $ 40,000 “BTC) at an 11% discount and still make a profit”.
However, other users like Rama Rao strongly believe that the GBTC should trade at a premium of 20% to 30% on BTC, but not everyone agrees. One user known as JPC believes that the opposite should be the case. In its tweet, JPC said:
“GBTC could get a 20-30% discount as more people learn to buy BTC directly on exchanges.”
Do you agree that increased competition has resulted in a growing discount on GBTC? You can let us know what you think in the comments section below.
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