Partnered With:

Grayscale GBTC continues to see negative premiums, possibly as Canada's first Bitcoin ETF eats into its market share

Read this article in 5 Minutes

For a full month after the launch of the first Bitcoin ETF in Canada, shares in the Grayscale Bitcoin Trust (GBTC) traded at a discount to the BTC spot price.

Analysis: Grayscale GBTC Continues to See Negative Premia as Canada's First Bitcoin ETF Eats Market Share

Original source: Cointelegraph Chinese

For the first time, shares of the Grayscale Bitcoin Trust have traded at a discount to the BTC spot price for an entire month.

Rafael Schultze-Kraft, CTO of on-chain analytics provider GlassNode, shared this observation on Twitter on April 1, noting that the Grayscale Bitcoin Trust's share was at an average premium of -6% in March.

He noted that the discount in Grayscale's Bitcoin fund shares coincided with the launch of Canada's Purpose Bitcoin ETF. Since its launch at the end of February, the Purpose Bitcoin ETF has held 16,000 BTC, worth about $940 million.

The fall in the GTBC premium coincides with the launch of the Purpose Bitcoin ETF, which could attract investment from GBTC. The Purpose Bitcoin ETF held more than 16,000 BTC for a little over a month. (That still pales in comparison to Grayscale's 654,000 BTC holdings.)

-- Rafael Schultze-Kraft (@N3Cortex) April 1, 2021

GlassNode's CTO isn't the only one speculating that the launch of North America's first Bitcoin ETF could lure institutions away from the gray scale. Galaxy Digital CEO Mike Novogratz wrote on Twitter:

"Grayscale used to be the choice for institutional investors. There is now an ETF in Canada that charges 40 basis points. And there are a lot of funds in the US that charge very low fees."

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

Schultze-Kraft noted that the Grayscale Trust's bitcoin holdings have been flat in recent weeks, saying: "This is not surprising as it makes little sense to subscribe for a new GBTC share as long as the existing shares trade at a discount."

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

Since Grayscale shares have historically traded at a higher premium than the spot crypto market, many institutional investors have invested in the trust as an arbitrage device, with the assumption that the wide spread will offset the 10 per cent holding and associated interest expense for the six-month lock-up period.

Grayscale says it now has $45.6bn under management across 13 trust funds and launched five new ones last month. Its newly established Decentraland(MANA) Trust is valued at $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 new backed assets have seen significant gains in recent weeks, Filecoin topped the list with a 105% gain over the past week, according to CoinMarketCap.