Grayscale Now Holds 3.5% of BTC Circulating Supply Amidst the Collapsing Premium on GBTC
Grayscale, the world’s largest digital assets manager, has bought 5.36k BTC in February so far. This brings its total Bitcoin holdings to 653.83k BTC, accounting for 3.5% of Bitcoin’s circulating supply.
Meanwhile, the premium is at 8.54%, keeping between 2% to 16% since mid-January.
This Grayscale Bitcoin premium is the percentage of the Bitcoin price implied by GBTC shares trading above the Bitcoin spot — the difference between the market price of GBTC and its net asset value (NAV).
Often, GBTC trades at a substantial premium, 40% in December 2020 and 132% in May 2017, which happens because of the 6-months lockup for shares issued via private placement, making it “impossible for supply to keep up with demand in the secondary market (exchanges/brokerage),” noted trader and economist Alex Kruger.
According to him, if GBTC were converted to an exchange-traded fund (ETF), this premium won’t exist because arbitrageurs would create new shares, without lockups, to arbitrage the premium away.
Given that a large GBTC premium is a sign of strong demand for Bitcoin and institutional flows into the product, it has been one of the largest drivers of this bull market as labeled by JPMorgan. It makes sense that with the premium collapsed, market participants are worried.
However, the premium collapse is not due to the faltering demand for GBTC in the secondary market but because the GBTC premium trade is simply becoming too crowded.
This means increasing issuance — “issuance skyrocketed in the last few months, helping reduce the premium with a lag,” explained Kruger.
The premium of ETHE is also keeping down, between 2% to 20%, ever since late December when it was around 270%.
Grayscale has added about 200k ETH in the last two weeks of February, bringing its total holdings to 3.13 million ETH, over 2.7% of Eher’s circulating supply.