Bitcoin Price Surges Past $10,700 As Grayscale (GBTC) Premium Reaching for 30%

  • Analyst says Bitcoin still overvalued as per GBTC investors
  • Premium on Grayscale again on the rise
  • Grayscale gives institutional investors and IRAs and 401(k)s exposure to Bitcoin price movement

Last week, we saw Bitcoin price falling to $10,500 level but is now making a good start of a new week.

At the time of writing, BTC/USD has been trading at $10,720 with 24 hours gains of 2.81%. Price went as high as $10,753 while daily trading volume also sees a slight increase at $807 million.

Analyst, Timothy Peterson says Bitcoin is still overvalued according to GBTC investors and need to be somewhere between $8k to $10k.

A Sign of New Money Coming into the Market

As Bitcoin price started gaining momentum, the premium on Grayscale Investments began rising this weekend as well.

GBTC Premium, Source:

Currently, GBTC is trading at a premium of 27.41% which dropped down to 25%, a number of times in the past month.

Started at 40% premium in August last year, it dropped below 10% in November and during late December and early January, a period that saw Bitcoin hitting the bottom at around $3,200.

In April, the premium started gaining speed and went to a whopping 47%.

As economist and trader Alex Kruger explained at that time, it is a sign of new money coming into the Bitcoin market.

“Rise in premium is a sign of institutional net buying (easier to buy this ETN from ⁦Grayscale Invest⁩ than buy via a crypto exchange),” stated Bitcoin bull and Fundtstrat’s Tom Lee in February, when this premium was creeping up to 36% on the heels of BTC price reaching $4,000.

Grayscale Gives Institutional Investors and IRAs and 401(k)s Exposure to Bitcoin

Grayscale Bitcoin Trust (GBTC) acts as a Bitcoin fund that offers the opportunity to bet on Bitcoin by buying its shares which are touted to be the “publicly quoted securities solely invested in and deriving value from the price of bitcoin.”

GBTC holds more than 1.3% of the outstanding Bitcoin supply, as of July 2019.

The trust owns the Bitcoin of its investors on their behalf, which in turn entrust them to to the cryptocurrency custody service to keep them safe.

Recently, Grayscale announced Coinbase Custody as its new partners for this, which acquired Xapo (the previous custody provider to Grayscale) last week.

It allows institutional investors the exposure to Bitcoin price movement via traditional investment vehicles.

Additionally, GBTC is also available within tax-advantaged accounts such as IRAs and 401(k)s.

Competition to Push the Premium Down

Based on the current price of $13.45 per share in the trust, in order to buy a full BTC using GBTC, it would cost an investor nearly $13,500, due to the premium.

However, with the new entrants in the market like Fidelity and Bakkt, which has received a green light from the CFTC to launch its physically delivered Bitcoin futures platform next month on the 23rd, that will allow the institutional investors and pension funds exposure to Bitcoin, the premium could go down.

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