Analysis: Grayscale GBTC continues to have a negative premium, possibly because Canada's first Bitcoin ETF cannibalizes its market share

This is the first time that shares of the Grayscale Bitcoin Trust have traded at a discount to the BTC spot price for a full month.

Rafael Schultze-Kraft, CTO of on-chain analytics provider Glassnode, shared the observation in an April 1 tweet, noting that shares of the Grayscale Bitcoin Trust had an average premium of -6% in March.

He noted that the discount on Grayscale Bitcoin Fund shares coincided with the launch of Canada’s Purpose Bitcoin ETF, which has held 16,000 BTC, worth about $940 million, since its launch in late February.

The decline in GTBC’s premium coincides with the launch of the Purpose Bitcoin ETF, which could attract investments from GBTC.
The Purpose Bitcoin ETF holds over 16,000 BTC in a little over a month. (Its size is still dwarfed by Grayscale’s 654,000 BTC holdings).

— Rafael Schultze-Kraft (@n3cortex) April 1, 2021

The Glassnode CTO is not the only one to speculate that the launch of North America’s first Bitcoin ETF could draw institutions away from Grayscale. Galaxy Digital CEO Mike Novogratz tweeted:

“Grayscale used to be the go-to for institutional investors. Now there’s an ETF in Canada that charges 40 basis points. And there are a lot of funds in the U.S. that charge very low fees.”

Earlier this month, Brazil’s Securities and Exchange Commission also approved two cryptocurrency ETFs.

Schultze-Kraft noted that Grayscale Trust’s Bitcoin holdings have remained flat in recent weeks, saying: “This is not surprising, as there is little point in subscribing to new GBTC shares as long as existing shares are trading at a discount.”

Grayscale allows qualified investors to create a basket of stocks representing Bitcoin or other digital assets by depositing fiat currency. Grayscale then deposits the corresponding amount of cryptocurrency into its trust fund, and investors will face a 6-month lock-up period, after which they can sell their shares through the over-the-counter (OTC) market.

Because Grayscale shares have historically traded at a premium to the spot crypto market, many institutional investors have invested in the trust as a means of arbitrage, speculating that the huge price difference will offset the 10% holding and the associated interest fees during the six-month lock-up period.

Grayscale said it currently manages $45.6 billion in assets across its 13 trust funds, and the company launched five new trust funds last month. Its newly established Decentraland (MANA) trust fund is worth $17.4 million, followed by Livepeer (LPT) at $12.3 million, Filecoin (FIL) at $8.5 million, Basic Attention Token (BAT) at $3.7 million, and Chainlink (LINK) at $3.5 million.

While all of Grayscale’s newly supported assets have seen significant gains in recent weeks, Filecoin has taken the top spot with a 105% gain over the past week, according to CoinMarketCap.

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