Negative premium returns to the level of the same period last year? The return of the GBTC king?

Grayscale’s GBTC premium is continuing to narrow. Recently, its negative premium rate has officially entered 30%, and has narrowed to 29.79%, the smallest value in a year. Its premium rate has recovered to July 2022 levels.

More directly, how much return can GBTC bring to new investors this year?

In February this year, for example, GBTC once reached a low of 10.3 US dollars, and the negative premium was about 47% at that time. Taking today’s price as an example, the current GBTC price is $18.6. In less than 5 months, GBTC has created 80% of the US dollar denominated income, and if it is denominated in the currency standard, GBTC has also created a high return of 32%.

Assets that can outperform BTC are precious while we are still in a bear market.

Transaction surges, prices skyrocket, GBTC recovers in an all-round way

Previously, GBTC once faced a sell-off crisis. Since October 22, the level of negative premium has continued to rise, rising rapidly from over 30% to over 40%. In December 22 and February 23, GBTC faced a high discount of “half price” for a long period of time, and the negative premium rate continued to hover around 50%.

From a graphical point of view, it is not difficult to see that since mid-June, it has continued to rise for nearly half a month.

With the narrowing of the negative premium, the trading activity of GBTC has gradually become active. According to Nasdaq data, since mid-June, the trading volume of GBTC has continued to rise, and on June 20 it hit the highest trading volume this year, with a daily trading volume of 10.2 million US dollars.

According to Nasdaq data, the trading volume of GBTC in June reached 69.2 million US dollars, while in May, this figure was only 38.7 million US dollars, a month-on-month increase of 79%.

Accompanied by the recovery of GBTC is the increase in Grayscale’s revenue, which may revive this “flagship” institution in the currency circle that has faced many crises and rumors in the past year.

For a long time, Grayscale’s high fees have been criticized by investors. The management fee of GBTC is 2%, and that of ETHE is 2.5%. If it is estimated based on its holdings, Grayscale is expected to have earned approximately $44.13 million in revenue from its flagship products GBTC and ETHE this month. It’s also the best month for earnings since May 2022, when the market was deeply bearish.

There are various signs that the recovery of GBTC data is reflecting the market’s growing positive sentiment towards it.

What happened to GBTC when people disliked it until it fully recovered?

In sharp contrast to the present, there are various crises and negative rumors of GBTC in the past year.

At the end of 2022, a rumor about GBTC instantly detonated the market. Although Grayscale has earned a lot of income by virtue of its dominant market position for a long time, the crisis of Grayscale’s parent company has dragged Grayscale down. Market rumors say that Genesis, an encryption trading and lending institution, may have solvency problems. In order to fill the hole, Genesis’s parent company DCG may choose to dissolve GBTC and ETHE issued by another company, Grayscale (Grayscale).

But in January of this year, one wave was not smooth, and another wave rose again. Gemini co-founder Cameron Winklevoss issued an open letter calling on the founder of Digital Currency Group (DCG) on behalf of its platform users, demanding that it repay the $900 million owed. Cameron also disclosed in the open letter that DCG owes Genesis approximately US$1.68 billion in total, and that DCG’s intensifying crisis has aroused great concern in the encryption community.

As the Genesis crisis intensified, Gemini continued to sell GBTC collateral in the OTC market. This has also led to the continuous expansion of GBTC’s negative premium. Its selling scale once accounted for 5% of the total circulation of GBTC.

Previously, DCG had increased leverage to speculate on GBTC, which was also one of the main reasons for its financial crisis. According to statistics from Odaily Planet Daily, starting from the first quarter of 2021, DCG spent a total of US$1.305 billion to purchase 54,823,667 GBTC shares at an average unit price of US$23.8 per share. As the market turned bearish in an all-round way, DCG continued to increase its positions in the bear market, and once “leveraged” to speculate in coins. With the continuous decline of GBTC and the gradual deterioration of the market environment, its financial crisis gradually emerged.

How pessimistic the market was once on GBTC, how bullish it is now.

Although the market has shown an extremely positive outlook on the future of GBTC, there is still an extremely high gap from GBTC’s historical highs.

In June 2017 and September 2017, GBTC once set a positive premium of more than 100%. According to data from Coinglass, its premium rate has reached a record high of 132%.

During the bull market in 2021, the GBTC premium rate will turn from positive to negative. However, its negative premium is not serious and has been maintained at around 10% or 20% for a long time.

The current premium level of GBTC is much lower than it used to be. As the market sentiment gradually turns to “the bull’s return”, is GBTC expected to return to its former throne, or even return to a positive premium?

June 16 was the beginning of the current round of GBTC’s rise.

On the same day, BlackRock, one of the world’s largest asset management groups, submitted a document application for a spot bitcoin ETF to the US SEC through its subsidiary iShares. This also allows the encryption market to once again have the narrative mode of “regular army” entry.

According to the application documents, its assets mainly consist of bitcoin held on behalf of the trust custodian, and the “custodian” is achieved by means of custody through the cryptocurrency exchange platform Coinbase. As the news of the regular private ETF spread, GBTC once again returned to the center of vision of some investors.

In the long history of GBTC, the company has tried several times to convert GBTC into ETF, so as to provide GBTC investors with a complete exit channel. It first submitted this application in October 2021. Unfortunately, this idea has never been realized. With BlackRock entering the BTC ETF market, the market speculates that the possibility of such products being approved is rapidly increasing.

If the BTC spot ETF is finally launched, the cryptocurrency will usher in a historic moment. Once the spot ETF is pioneered, GBTC is expected to be converted into an ETF smoothly, and its negative premium will no longer exist. Not only does it contain huge arbitrage space, but it is also expected to bring GBTC back to the throne.

BTC ETF competition is fierce, can Grayscale regain the throne?

The overall recovery of the data and the strong expectations of the ETF all make GBTC seem to be improving. But in the long run, whether its market position is expected to return to its heyday, there are still many difficulties, and investors don’t have to have high expectations for it.

For a very long time, Grayscale has been the largest single buyer in the crypto market.

At the beginning of 21, Grayscale’s holdings of BTC reached a historical peak, exceeding 650,000 BTC.

Looking at its images is even more shocking. Before reaching the top, the number of coins it holds is like a steep mountain, rising continuously. Due to its unique mechanism, Grayscale can only buy but not sell, exerting an incalculable impact on the Bitcoin spot market.

The “consistent” large number of purchases also made it once dubbed the “bull market engine” and Bitcoin Pixiu.

In the new round of bull market, Grayscale’s market position may be impacted.

Prior to this, due to many regulatory reasons or compliance requirements, Grayscale GBTC was once considered the best choice for institutional investors. However, if the spot ETF is launched, GBTC will face many competitors.

Recently, Wall Street giants have concentrated on applying for ETFs and entering the encryption market. In addition to BlackRock, it also includes Fidelity, Invesco, WisdomTree and many other institutions.

Once the ETF is approved, regardless of whether GBTC can be successfully converted, its impact will be far-reaching.

If GBTC cannot be converted, the approval of other BTC ETFs will attract GBTC investors to other ETFs. If GBTC is successfully converted, other competitors will also stimulate Grayscale to be forced to reduce its high management fees. Most importantly, if GBTC is converted into an ETF, the fund will face strong outflow pressure, and its huge asset management scale may also decline sharply.

The sentiment of “the bull returning quickly” has gradually emerged. No matter whether Grayscale’s market position can return to the past, its huge size still deserves the market’s attention. Even now, Grayscale still holds 625,900 BTC, worth about $19 billion, accounting for 3.2% of Bitcoin circulation.

With the continuous improvement of the market, Grayscale’s function as a “weather vane” in the market is far less than before. Products that can replace Grayscale on the market are gradually increasing, and Grayscale is no longer the only choice in the market.