Grayscale Bitcoin Trust (GBTC)’s Exchange Traded Note (ETN) Premiums Signal Institutional Net Buying


As many of our readers are already well aware of, the past 12-14 months have seen discussions regarding Bitcoin ETF’s gain immense traction across the globe. To be even more specific, regulatory authorities in the US have “dominated the ETF news cycle” — primarily because they remain one of the key entities to have a defining say on such matters.

In relation to this subject, many market experts are of the belief that the approval of a BTC ETF will have a direct impact on the “influx of investors” into this ever-expanding space.

And while the exact economic impact of an ETF remains to be determined, we can see that there currently exists an exchange-traded product called an ETN (Exchange-Traded Note) that allows investors to gain much-needed exposure to Bitcoin and its associated offerings.

A Closer Look At What ETN Has To Offer

At the time of writing this article, Grayscale Bitcoin Trust (GBTC) is one of the most popular ETN options that traditional investors can make use of. It not only allows crypto enthusiasts to gain exposure to the “daily price movements of Bitcoin” but it does so without the investor having to own any BTC him/herself.

In regards to the matter, a spokesperson for Grayscale was quoted as saying :

“The first publicly quoted securities solely invested in and deriving value from the price of bitcoin” that allows investors to “gain exposure to the price movement of bitcoin through a traditional investment vehicle, without the challenges of buying, storing, and safekeeping bitcoins.”

From a technical standpoint, we can see that each singular share of GBTC currently trades at around 1/1000th of Bitcoin’s actual price. This essentially means that a single share can currently be procured for a base price of $4.82.

Tom Lee’s Opinion Regarding ETN’s

At this point in the article, it is worth mentioning that Fundstrat Global’s Thomas Lee, recently posted a message online that hypothesized the possibility of GBTC’s premium to BTC’s net asset value (NAV) pointing to the fact that institutional investors are now making significant crypto-related purchases.

On this issue, Lee sent out the following message:

“CRYPTO: $GBTC premium to NAV creeping up to 36% on heels of $BTC surge to ~$4,000… Rise in premium is a sign of institutional net buying (easier to buy this ETN from @GrayscaleInvest than buy via a crypto exchange) … another sign 2019 way better than 2018 for crypto,”

More On The Matter

When looked at closely, we can see that the price of Bitcoin surged quite drastically a few days back (the 17th of February to be exact) — with the flagship currency now pushing against the $4,000 resistance level.

Additionally, from a historical perspective, GBTC’s premium has been observed to grow whenever BTC experiences a sudden increase in its price (and vice-versa). With that out there, it is also worth remembering that GBTC tends to exaggerate Bitcoin’s constant sentiment shifts— thus weakening Lee’s aforementioned theory.

Final Take

In rounding off this piece, it should be noted that Lee’s assessment of GBTC’s current NAV premium seems to be quite over-the-top. This is because a recent study by Bloomberg states that GBTC’s current premium is just under 19% — while its average 52-week premium is around 40%.

On the matter, Lee was quick to issue a response by releasing the following tweet

Last but not least, it should be noted that GBTC is currently trading 15% above its opening price while BTC is up around 2% over the last 24-hours.

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