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The Grayscale Bitcoin Trust is marking notable gains since the beginning of 2019, despite the rising premium in the product compared to Bitcoinâs net asset value (NAV). According to some, this is a sign of institutional net buying and that new money is coming into the market.Â
GBTC Soars 47% Since Pre-5K Breakout
GBTC, a product offered by Grayscale Investments, the worldâs largest digital asset fund, is having a great year so far, gaining more than 56 percent in the past three months.
More notably, the product is up 47 percent since Bitcoinâs latest rally on April 2nd, while Bitcoinâs spot price 00 has increased by only 28 percent.
According to economist and popular trader Alex KrĂŒgerâ, this is a sign of new money coming into the market. He explained:
GBTC 10% today, outperforming BTC. â GBTC +47% since [April 2nd] breakout â BTC +28% since [April 2nd] breakout Another symptom of new money coming into crypto.
Earlier this week, Bitcoinist reported that institutional Bitcoin trading volume has grown for four consecutive months. However, GBTC has lost some market share dropping to under 24 percent compared to over 50 percent when it comes to institutional products.
However, the latest rally of Bitcoinâs price did cause the assets under management (AUM) of Grayscale Investments to surge past $1 billion. Shortly after that, the asset manager increased the overall share of Bitcoin as part of its composition by 1.5 percent.
Why Is The GBTC Premium Rising?
The price of one GBTC share is set at 0.00098409 BTC. At the time of this writing, this equals $5. Given the current price of Bitcoin 00, this means that GBTC buyers are happily paying a premium worth around 37 percent. Moreover, thereâs also an additional 2 percent annual fee on top of the premium.
Back in February, when the premium was almost identical, the head analyst of Fundstrat Global Advisors, Tom Lee, commented on the matter, explaining that the rise in premium is a sign of institutional net buying.
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 âŠ@GrayscaleInvestâ© than buy via a crypto exchange)âŠ
âŠanother sign 2019 way better than 2018 for crypto pic.twitter.com/hdFh8y3sY9
â Thomas Lee (@fundstrat) February 19, 2019
Why Pay a Premium on Bitcoin?
Shares of GBTC are touted to be the first âpublicly quoted securities solely invested in and deriving value from the price of bitcoin.â
GBTC allows institutional investors to receive exposure to the price movement of bitcoin by using a traditional investment vehicle. In other words, investors donât have to worry about buying, storing, and managing their private keys.
Moreover, GBTC shares are also eligible to be held in certain IRA, as well as other brokerage accounts. Hence why investors are paying that high premium compared to Bitcoinâs spot price.
It appears that the latest price surge may have shifted the market sentiment. Bitcoinist reported that Chinese traders are happily paying a markup for Tether stablecoins, as it provides the easier way to buy Bitcoin compared to the Chinese Yuan (CNY).
What do you think of the performance of GBTC and its high premium? Donât hesitate to let us know in the comments below!
Images courtesy of Shutterstock, TradingView
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.