Bitcoin Investment: Grayscale’s GBTC Premium to Shrink Twice in 2020
The Grayscale GBTC premium over market prices may be one of the true signals for investment interest in Bitcoin (BTC).
GBTC Shares Signal Institutional Interest
The fund, which holds 0.1 BTC in each share, has allowed mainstream investors to get exposure to BTC, though without the technicalities of holding their own coins. GBTC has been available to institutional investors, and more recently, as a retail investment through brokerage accounts.
A low GBTC premium means decreasing interest or market corrections for Bitcoin. In 2019, the premium peaked during the rally from April to July, then shrinking again. At one point, GBTC shares exposed traders to BTC at a discount.
I'd be willing to bet that the GBTC premium will be crushed to single digits on the week of July 15 2020 and October 21 2020
— nic carter (@nic__carter) January 16, 2020
In 2020, with regulatory requirements becoming more predictable, the interest in Bitcoin may become more consistent. However, with growing opportunities to trade BTC derivatives, GBTC is only one of the mainstream products tied to the leading coin.
Bitcoin Component in Grayscale Fund Still Trades at Discount
During the latest BTC rally, assets under management for Grayscale grew to $2.5 billion, getting close to the $2.7 billion high during the bull run of 2019.
01/16/20 UPDATE: Net Assets Under Management, Holdings per Share, and Market Price per Share for our Investment Products.
— Grayscale (@GrayscaleInvest) January 16, 2020
In the past year, more funds flowed into BTC, with altcoin investment shrinking. But despite the recent bull run, the Bitcoin component in the fund is at a discount. Each share of GBTC trades at $8.42, while BTC prices run above $8,885. However, buying GBTC does not mean the price can be arbitraged, and in fact, may signal still-cautious investors.
The Bitcoin fear and greed index, which is reflective of the wider market, is neutral at 54 points, the highest level since October 2019, and up from lows around 20 points during the December sell-off. However, the index only tracks trading activity and not actual general optimism about BTC.
As 2020 started on a high note, optimistic predictions are returning. However, the GBTC premium has not materialized yet, and the sentiment may turn if prices correct. BTC remains unpredictable, with expectations of a relatively stagnant 2020, though still with the possibility of wild card gains. For technical predictions, BTC is also opaque. But the trend noted in 2020 is that enthusiastic newcomers will not help boost prices.
I still dont think this looks right for a bullish continuation although my original fractal was invalidated. I also think there are too many of the permabull goons that are still in the game. This, while the public is long gone and doesnt give a shit. #BTC pic.twitter.com/oYupRRDbDm
— Bear with Bullish Tendencies (@SlowProfits) January 15, 2020
Trading BTC is now in the provenance of experienced market participants, with an interplay between futures and spot markets. Bitcoin activity also grows and shrinks within days, going to baseline after rallies end.
What do you think of institutional interest in Bitcoin investment in 2020? Share your thoughts in the comments section below!