Bitcoin custodian and asset management firm New York Digital Investment Group has filed an application for an Exchange Traded Fund to issue shares of “NYDIG BITCOIN ETF.” NYDIG… This week’s edition of wNews digs into the Grayscale arbitrage trade. Understanding how this particular trade works is key to identifying its effects on the greater crypto economy. The premium for Grayscale’s Bitcoin Trust shares slid into the negative territory yesterday, a rare occurrence for the asset. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information. Leading analyst Ben Lilly points to increased demand among market movers after last week’s crypto price crash. Who We Serve We are proud to serve hedge funds, family offices, asset managers, and financial advisors.

Now, with the premium deeply in the negative, the incentive has disappeared to redeem shares of GBTC, and this, unsurprisingly, is what has occurred. We’re committed to covering those funds that are most relevant to investors and that hold a significant portion of industry assets. Funds with suspended coverage or that have never been covered are often those that are both smaller in size and are less widely held by our customers. As of March 10, there are 452 million unrestricted outstanding shares that can be sold, which equals roughly $23 billion. The vast majority of the BTC flowing into the trust was offset by equal short positions through derivatives, or more likely simply made with borrowed coins.
The information on this site is for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. The information on this site is general in nature and should not be considered legal or tax advice. An investor should consult a financial professional, an attorney, or tax professional regarding the investor’s specific situation. The good news is that the last shares will come to market in the coming weeks, meaning the selling pressure is largely behind us. This has helped to restore confidence in GBTC, and recent trading sessions have seen the discount narrow. The second is the law of large numbers, where GBTC became a victim of its own success. As I said, the investors had to wait six months before they could sell their shares. In the next chart, I have lagged the shares in issue to reflect the selling pressure coming to the market.
ByteTree’s Bitcoin fund data shows all the Bitcoin funds hold 794,520 BTC, which means GBTC represents 82% of all BTC held by funds. Bitcoin news portal providing breaking news, guides, price analysis about decentralized digital money & blockchain technology. With so much uncertainty around GBTC”s future, potential investors should continue to tread carefully. Simplify is not responsible for the content on external websites and makes no judgment or warranty with respect to the accuracy, timeliness, or suitability of the content, services or products found on the websites linked hereto. The un-subsidized SEC yield is calculated with a standardized formula mandated by the SEC. The formula is based on maximum offering price per share and does not reflect waivers in effect. This is also referred to as the “unsubsidized standardized yield”, “unsubsidized 30-Day Yield” and “unsubsidized Current Yield”. The risk that the Model used by the Fund to determine or guide investment decisions may not achieve the objectives of the Fund. Additionally, the portfolio manager of the Fund is able, under certain adverse conditions, to deviate from the Model employed by the Fund. An investment in the fund involves risk, including possible loss of principal.
In addition to Purpose’s BTC ETF, Evolve ETFs launched its own Bitcoin ETF on Feb. 19 with the ticker EBIT. Although it lost out on the first-mover advantage that Purpose’s ETF gained, it currently has assets under management of $78.52 million, which is just over 12% of BTCC’s current AUM. Overall, there are several notable ETFs listed on the Toronto Stock Exchange. Purpose Investments launched North America’s first-ever Bitcoin ETF on Feb. 18, which saw the assets under management rise to over $500 million in under a week and subsequently crossed $1 billion in the same month. The ETF’s AUM currently stands at $714.6 million or 19,407.63 Bitcoin as of June 4 and uses the ticker BTCC. Since 2013 the Grayscale Bitcoin Trust Fund has offered its investors exposure to Bitcoin through a publicly quoted private instrument. However, the trust’s convertibility and liquidity vastly differ from an Exchange Traded Fund .

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They could act as something of a test case, and possibly pave the way to eventual SEC approval of U.S. products. The Osprey Bitcoin Trust buys and holds Bitcoin on behalf of its investors, using Fidelity as a custodian. This fund has been around since 2019, but until this week, it had only been available privately to accredited investors. Additionally, companies are now purchasing and holding Bitcoin on their balance sheets in lieu of fiat currencies such as dollars and euros. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. This trade gives investors a great opportunity to lock in a profit from a spread of over 30% in just a couple of weeks time. Current GBTC NAV is 46.79% via BloombergThis is still a very large spread and opens up the possibility of an arbitrage trade where you sell GBTC stock and buy bitcoin in order to profit from a closing of the spread.
The recent $250 million GBTC purchase from Grayscale parent company DCGand the Simplify ETF launch are further adding to the positive demand of Grayscale’s crypto trust shares. Prior to this week, the premiums hit highs until mid-February, before trending down until early May. The downtrend continued even as Bitcoin’s price rallied, suggesting that more dominant players were dumping on retail investors. Market analyst Ben Lilly of Jarvis Labs noted to Crypto Briefing that “there’s accumulation taking place with rising balances,” suggesting returning demands among institutional investors. The premium for Grayscale’s Bitcoin and Ethereum shares reached two-month highs Monday, indicating positive market sentiments. Due to these features of GBTC as a trust, the actual price of GBTC has almost always been somewhat disconnected from the NAV value of each share. This disconnect might not be a problem when GBTC is trading at a premium to NAV, but negative sentiment can have an outsized impact on the price, pushing it well below NAV. Historically, trust shares have been scarce in supply, making securities borrow difficult and expensive. Investors have therefore been unable to short GBTC against the underlying.

And as any smart hedge fund would do seeing what appeared to be an arbitrage, they looked for ways to isolate risks and add leverage to juice returns. The ability to short BTC through futures or on exchanges had been around for a while, but the emergence of BTC based borrowing and lending on large platforms came to prominence in 2019 and really took off in 2020. These platforms allowed individual crypto holders to lend out their coins and receive interest on the loans. The platforms then aggregated these coins and lent them out to hedge funds.
In practice, on roughly one out of three trading days, bitcoin and Bitcoin Investment Trust actually moved in opposite directions. Bitcoin futures are scheduled to open up on December and that should see a significant change to market structure and introduction of liquidity. Today’s trade idea is to short GBTC and buy an equivalent amount of bitcoin while GBTC continues to trade at a significant premium. Historical premium of GBTC over bitcoin NAV via YChartsAs of today, Bloomberg shows that GBTC NAV is currently trading at a premium of 46.79%. Another drawback is that Bitcoin trusts could trade at a significant premium to net asset value for extended periods. At the time of writing, OBTC is trading at an 11% discount to NAV, and GBTC shares are also an 11% discount to NAV. To calculate net asset value, take all assets and divide them by the outstanding shares. Shares of both GBTC and OBTC can be purchased and sold through any brokerage account, just like stocks. Grayscale Bitcoin Trust is a much larger fund with a long history and charges a management fee of 2%. Osprey Bitcoin Trust is the new kid on the block and just a fraction of the size and charges a 0.49% management fee.

Stocks

No representation or warranty is made, expressed or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of the Information. It should not be regarded by prospective investors as a substitute for the exercise of their own judgment or research. Secondly, the lockup period could continue to reduce for private placement investors. Earlier this year, following approval from the SEC, the previous 12 month holding period was reduced to the current 6 month period in GBTC. Should the lockup period reduce again in the future, this could translate into further sell pressure on the shares from existing subscriptions. Due to the turmoil in the capital markets since mid-February, the tech-heavy Nasdaq Composite Index has experienced a pullback of 10%.
Grayscale charges a 2% annual management fee on GBTC and a 2.5% annual fee on ETHE which the investor pays during the holding period. If the premium is still positive after shares unlock, investors can pocket the difference in the spread. Below we outline the trade setup for 3 broad types of market participants. Investors don’t directly see the 2% detraction from the investment. It is handled in house and is figured into the premium that investors pay when buying GBTC. The premium ranges based on the value of the share in correlation to how much Bitcoin it represents. For GBTC, this is simply the net value of the assets in the trust, i.e. the value of the Bitcoin. The premium is the trading value of anything above NAV and the discount is anything below NAV. The discount/premium to NAV is a percentage that calculates the amount that an exchange traded fund or closed end fund is trading above or below its net asset value.

If you make a mistake and lose Bitcoin, there isn’t anyone to bail you out. Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade. A Bitcoin trust is perfect for anyone who does not want to buy Bitcoin directly. There are several benefits for an individual who has never had experience with cryptocurrencies. LaValle, who declined to give direct recommendations, shared his investing philosophy from the first decade of his career. Read more about Btcoin to Dollar here. “I’ve been an active participant in the ETF ecosystem watching the evolution of the asset class and Introduction in Crypto Trading </a the maturation of the crypto ecosystem," he said in an interview. "And now we've gotten to a place where it's really not a question of if there's going to be a bitcoin ETF, it's just a question of when there's going to be a bitcoin ETF." Rosenbluth noted that “anyone who has held GBTC for a year or more is still likely to have made significant total returns”, given the soaring value of bitcoin. Blue said that dynamic “flipped” in February 2021, when the Purpose Bitcoin ETF, the first Canadian spot bitcoin ETF, launched, amassing more than $1bn in assets within a month. How to earn free crypto though debit card spending and exchange sign up links.

With the GBTC trust AUM now at $3.7bn and growing (ETHE @ $360mio and growing), shares are likely to become easier to borrow with higher availability as the public float grows. Since Grayscale does not have to hold excess cash for redemption purposes under this structure, the liquidity of its shares is at greater risk. I think that the wild card in all of this is the traders who are trying to outsmart the market and might have trades on to take advantage of what they anticipate will happen. But when the unlock comes and goes, they will have no reason to keep those trades on and will look to close them. If the traders who are betting on a big dip in GBTC premium or big moves in spot are actually the crowded side of this whole trade, then they could create a move in precisely the opposite direction when they go to unwind those positions. As fiat goes through inflation, so will your stock’s shares because they are pegged to USD and aren’t the tremendous asset we all love. Since Grayscale is a business, they’re going to charge a yearly maintenance fee, so you’re paying for them to secure the fund.

The SEC has been firm in its stance that cryptocurrencies are susceptible to fraud, theft and speculation. Given SEC Chair Gary Gensler’s recent commentary on cryptocurrency, there door is slightly ajar for the approval of a bitcoin ETF, but it doesn’t appear it’s happening anytime soon. I think we’re looking at 2022 at the earliest and maybe even into 2023. Historically, GBTC shares have traded at a hefty premium relative to the price of underlying Bitcoin. Things changed in February this year when GBTC’s shares turned negative for the first time since the fund’s inception in 2013. You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice.

Professional Crypto Exchange Our advanced trading platform for serious investors. GBTC is a convenient way to invest in Bitcoin through a brokerage account that may offer tax advantages. You’re buying a share of a company like you usually would, so it’s as easy as anything else. When you supply Bitcoin or USD to the fund, you’re given shares based on the bitcoin representation we discussed above. I have looked at the GBTC share price and compared it to Bitcoin’s price on several occasions over the past couple months. Frequently I’ll see GBTC make a huge move (sometimes over 20% in one day) while Bitcoin makes a small move (say less than 5%), or vice versa. The SEC thus far has refused to green-light a Bitcoin ETF, though its time could be soon. Canada recently approved its first crypto ETF, and days later approved its second.

New Etf Marries Equities And Bitcoin

Each share of the Trust represents fractional ownership of Bitcoin. Grayscale is a subsidiary of Digital Currency Group, which is a New York-based crypto venture capital fund. “Given the creation and redemption structure embedded within the ETF, there is an opportunity for market participants to arbitrage the price of the funds,” LaValle said. The fund from Simplify Asset Management invests 100% in U.S. equities via a combination of ETFs and futures, while providing a 10% exposure to bitcoin (allocation capped at 15%) via the Grayscale Bitcoin Trust, ticker GBTC. New investors could, in theory, buy the closed-end fund because its discount to NAV represents an arbitrage opportunity, but only if there is a path to close the discount. BTC, ETH and LUNA lead the rebound in digital assets after a large post Thanksgiving day sell-off induced by fears of a new Covid-19 variant.
You need to determine if the shares are trading at a discount or a premium to the net asset value. “I traded a very broad range of investment products during the first decade of my career,” he said. “Some traded premiums, some traded discounts. I’ve always viewed products trading at a discount to be a buying opportunity.” GBTC is a closed-end fund, which means it cannot easily add or remove shares to deal with inflows and outflows. As a result, its share price is determined by supply and demand, rather than being tied to the underlying value of its assets, as would be the case with an ETF, where new shares are created and redeemed seamlessly. The flip from premium to discount has hit investors in the pocket. While GBTC’s share price rose 42 per cent in the first 10 months of this year, its NAV jumped 92 per cent and the price of bitcoin 95 per cent, according to Morningstar. In the 12 months to the end of October, while bitcoin surged 340 per cent, GBTC’s share price was up 220 per cent, Morningstar found.
For the past two months, Grayscale Bitcoin Trust has traded at a negative premium to the net asset value . GBTC historically traded at a high premium relative to the underlying, averaging a 15% premium since the fund’s inception. This was largely due to GBTC being the only investment vehicle easily accessible to institutional investors. While there are assuredly many factors at play, a deeply negative premium can be attributed to various developments in the ecosystem. The Osprey Bitcoin Trust , which hit public markets this week, is the latest in a small group of funds that provide exposure to cryptocurrencies through their brokerage accounts.

Bitcoin ETF applications have mushroomed over the past year but they remain in limbo today as the Securities and Exchange Commission rejected some and delayed others. “This ETF offers diversification and potential upside, and allows an advisor to invest their clients in this asset class,” he said. Reproductions and distribution of this news story are strictly prohibited. ARK Investment Management LLC is the investment adviser to the ARK ETFs.

• The GBTC discount rebounded sharply between May 21 and May 24 from -21.23% to -3.86% before falling to around -12% as of June 3.
• The problem with trades that are too good to be true is that they are just that.
• GBTC typically trades at a substantial premium to its Net Asset Value .
• Blue said that dynamic “flipped” in February 2021, when the Purpose Bitcoin ETF, the first Canadian spot bitcoin ETF, launched, amassing more than $1bn in assets within a month.
• The Fund will not invest directly in bitcoin, bitcoin futures, or other cryptocurrencies.

To explain in numbers, GBTC peaked at $29.66 in 2017 but now is priced at $27.35. Bitcoin peaked at around $19,800 in 2017 and now sits at about $32,850. The point here is that Bitcoin holders have significantly outperformed GBTC holders and will probably continue to do so. As long as the GBTC structure remains (i.e. discounts, extra volatility during swings, and the 2% annual fee), this probably won’t change. Announced its plans to transform GBTC into an ETF, hinting towards lower management fees and improved fund structure. The news sent the fund’s premium into a rebound — but only temporarily. The Fund will not invest directly in bitcoin, bitcoin futures, or other cryptocurrencies. The Fund is not expected to track the price movements of cryptocurrencies. As a rule of thumb, if you don’t understand the premium, you shouldn’t be buying shares of GBTC or another trust. This is especially true with new trusts as they can tend to trade at a very large premium when they launch and sometimes even higher sometime later .

Since then, its Bitcoin reserves have been on the gradual decline for the first time ever to the current levels of 652,410.55 as of June 4. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. On May 3, the firm announced that it had purchased $193.5 million worth of GBTC shares by April. Moreover, DCG increased its GBTC shares repurchase potential to $750 million. On March 10, Digital Currency Group , Grayscale Investments’ parent company, announced a plan to purchase up to $250 million of the outstanding GBTC shares. Although the conglomerate did not specify the reason behind the move, the excessive discount certainly would have pressured their reputation.