Grayscale’s Bitcoin Investment Trust (GBTC) has Greater Market Penetration than the Most Popular S&P 500 ETF


Last week, Bitcoin hit a new high on several cryptocurrency exchanges, but it has been stuck in a range since then.

At the time of writing, BTC/USD has been trading around $19,000 with $1.86 billion in trading volume.

However, the digital asset is still up over 167% run-up YTD and made an all-time high weekly close over the weekend.

As we have been reporting, unlike the retail-driven bull run of 2017, 2020 is looking more institutional driven where the financial industry is playing a bigger role.

“The multitude of regulated crypto exchanges and custodians has eliminated the ‘career risk’ for institutional investors,” PwC’s Hong Kong-based Global Crypto Leader Henri Arslanian said in an interview with Bloomberg.

“In 2017, there was retail FOMO. The question is whether we will see institutional FOMO in 2021.”

GBTC’s the Way to Go

According to JPMorgan Chase strategist, Grayscale Bitcoin Trust (GBTC) points to the institutional demand, taking the crypto market beyond millennials' retail demand.

GBTC’s “exponential” growth, which has swollen to over $10 million from $2 billion in Dec. last year, suggests that institutional investors like family offices and asset managers played a bigger role in the recent rally, a team of JPM strategies led by Nikolaos Panigirtzoglou wrote in a note.

GBTC is currently trading at a 27.52% premium to the price of Bitcoin.

The firm saw about $720 million of inflows in the third quarter, 81% of which came from hedge funds. According to Michael Sonnenshein, managing director of Grayscale Investments, the size of investment allocations is also growing.

GBTC actually stands out as a market leader in terms of market penetration, as per TradeBlock. GBTC’s AUM is just shy of 3% of the total BTC market cap, which is much larger than other investment trusts and ETFs in different markets. GBTC is followed by the most popular S&P 500 ETF, SPY, at 1.25% market penetration.

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Last month, Guggenheim Partners reserved the right for its $5.3 billion fund to invest in Bitcoin via GBTC.

“Institutional investors are keen on portfolio construction in the wake of Covid, and the ways they need to reposition themselves given how governments have injected stimulus into the system,” said Sonnenshein.

Compared to $52 trillion funds managed by institutional investors, the Bitcoin market at $355 billion and the crypto market at $570 billion are still very small.

But as legendary investor Paul Tudor Jones himself said, because of this gap between Bitcoin and the market of equity, gold, and other assets, the digital asset has immense potential for growth and upside.

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