Grayscale Bitcoin Trust to Convert to an ETF, Premium Remains Negative: What’s Next?

Earlier this Monday, Grayscale Investments introduced its plans to rework Grayscale Bitcoin Belief (GBTC) into an exchange-traded fund. Up till just lately, GBTC was one of many solely funding funds for establishments and retail traders alike. Amidst rising competitors, nonetheless, the fund’s excessive administration charges and stringent lock-up intervals misplaced favor with many traders. Since February, GBTC had continued to commerce at a destructive premium — that means that the fund was buying and selling under the worth of Bitcoin.

In late 2020, GBTC premium shot as much as as excessive as 50% due to a surge in institutional demand for Bitcoin. The premium sunk to an all-time low of -14.34% earlier final month. This important decline was seemingly the wake-up name Grayscale wanted to show its more and more outdated funding product round. In a weblog publish, the funding agency said that it was “100% dedicated” to changing its Bitcoin fund into an ETF.

“In the present day, we stay dedicated to changing GBTC into an ETF though the timing will likely be pushed by the regulatory setting. When GBTC converts to an ETF, shareholders of publicly-traded GBTC shares is not going to have to take motion and the administration price will likely be lowered accordingly.”

Based on Grayscale, the agency had utilized for a Bitcoin ETF with the Securities and Alternate Fee (SEC) again in 2016 and 2017. “[T]he regulatory setting for digital property had not superior to the purpose the place such a product may efficiently be delivered to market,” Grayscale mentioned. They had been seemingly proper, as again then, Bitcoin’s institutional curiosity was sparse at finest. Nevertheless, with Canada approving Bitcoin ETFs earlier this 12 months and the likes of Constancy just lately becoming a member of the race, the time appears ripe for Grayscale to lastly revamp GBTC.

Why Grayscale Bitcoin Belief’s Premium Stays in Downtrend

Following the announcement on Monday, GBTC shares rallied 5% as premium bounced from -9.32% to -3.78% — maybe indicating a renewed confidence from institutional traders. Nevertheless, the premium plummeted again right down to -8.35% on Tuesday. Establishments could have closed their highly-levered positions on the high, as their 6-month lock-up intervals ended.