Editors Note: This article comes fromBeep News, by Breeze, published with permission.
Editors Note: This article comes from
, by Breeze, published with permission.This move was interpreted as DCGs self-produced and self-sold, wanting to reverse the negative premium for many consecutive days to positive. While expressing sarcasm, industry practitioners also show a sense of being dominated between the lines.
Grayscale has become a weather vane for Bitcoins rise and fall. In addition to Grayscale, there are 14 publicly traded financial products that use Bitcoin as the underlying asset, and 25 listed companies have added Bitcoin to their investment portfolios.
This not only shows that Bitcoin is accepted by a wider public, but also reflects that the industry is developing towards partial centralization and initial monopoly. Mainstream players like DCG are still accelerating their deployment.Why does GBTC have a negative premium?GBTC is a Bitcoin investment product launched by Grayscale Investment. Grayscale packs about 0.001 bitcoins into one GBTC.The so-called negative premium means that the price of GBTC is lower than the price of the underlying asset - 0.001 BTC.Taking the data at the time of writing as an example, the price of Bitcoin is $54,224 per piece, which is equivalent to the target price of each GBTC being $54.224. The price of GBTC in the secondary market is $51.38 per share. Therefore, the price of GBTC is 5.2% lower than the price of the underlying object.The reason why the prices of GBTC and Bitcoin are disconnected is because they circulate in two markets. GBTC circulates in the stock market, while Bitcoin circulates in the cryptocurrency market. The price of both depends on buying and selling in their respective markets.When we say that GBTC has a negative premium, we are actually saying that the demand for GBTC in the secondary market has weakened. So to solve the problem of why GBTC has a negative premium, we can first analyze the motivation of investors in the secondary market to buy GBTC.To sum up, there are several reasons: first, compliance; second, convenience. Traditional investors can gain exposure to Bitcoin as long as they buy GBTC like buying stocks, and they don’t have to worry about custody and other issues; third, there is an expectation for GBTC to rise. This expectation can be translated into an upside expectation for Bitcoin. After all, assets have a rising trend, and it is profitable to speculate on such assets.It is currently in a bull market, and the price of Bitcoin is showing an upward trend, so the third point does not constitute the reason for the weakening demand for GBTC in the secondary market. The reason for the negative premium can be located on the first and second points.In February of this year, three Bitcoin ETFs were approved by Canadian securities regulators and listed on the Toronto Exchange. The three ETFs are: Purpose Bitcoin ETF (trading code BTCC), Evolve Bitcoin ETF (EBIT), CI Galaxy Bitcoin Fund (BTCX).
During the same period when the holdings of the Purpose Bitcoin ETF increased, the number of Bitcoins managed by the Grayscale Bitcoin Trust GBTC continued to decrease. Although GBTC still manages 655,000 bitcoins, which is far more than funds of the same type, the trend of ebb and flow between GBTC and BTCC is very obvious recently.
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Changes in Purpose Bitcoin ETF positions, source: GlassnodeGrayscale GBTC position changes, source: GlassnodeGrayscale charges a 2.5% management fee on Bitcoin assets under management, compared with 1% for the Purpose Bitcoin Fund. Grayscale’s GBTC has a 6-month lock-up period, while Purpose Bitcoin Fund has no lock-up period.In addition to the three recently approved Bitcoin ETFs, Bitcointreasuries.org information shows that Grayscale Bitcoin Trust has at least 11 competing products. In addition, despite repeated rejections by the US Securities Regulatory Commission, many companies including VanEck and Valkyrie continue to submit Bitcoin ETF applications, and the first Bitcoin ETF in the United States may be launched this year.
Grayscale, which once monopolized the entry of Bitcoin compliant investment, is currently facing fierce competition.DCG manipulating the marketThe reason why Grayscale Bitcoin Trust GBTC is so successful is due to its mechanism.First of all, it is a one-way process for qualified investors to purchase GBTC with cash or Bitcoin in the primary market, and GBTC cannot be redeemed into Bitcoin. In this way, Grayscale has reduced the circulation of Bitcoin in the market in a disguised form and pushed up the currency price.Secondly, when the overall price of Bitcoin is rising and GBTC is at a premium, because the demand for GBTC in the secondary market is strong, qualified investors who can participate in both the primary market and the secondary market become the best porters.- They continue to purchase bitcoins in the market, convert them into GBTC, and then sell GBTC to the secondary market after GBTC is unlocked, and then use the funds obtained to reinvest in GBTC, so as to continuously earn premium income .
- At this time, qualified investors have become a very strong force in Bitcoin buying. This is why the price of Bitcoin can often be pushed up and consolidated whenever a large amount of GBTC is unlocked.
- Third, when GBTC has a negative premium, whether qualified investors will continue to invest in GBTC will depend on multiple factors, such as:
- What is the growth rate of the underlying asset Bitcoin itself, and whether the income of investing in GBTC is still higher than investing in stocks, bonds and other assets.
Whether qualified investors have a strong demand for compliance and tax exemption. On the one hand, investing in GBTC can achieve tax exemption; on the other hand, whether qualified investors are willing to directly hold Bitcoin, because when GBTC has a negative premium, the gains/losses of directly holding Bitcoin are better than holding GBTC.After deducting the management fees and other costs charged by Grayscale, whether investing in GBTC can still bring benefits.Are there other compliant investment products that perform better?Even in this case, Grayscale and its parent company DCG still hold a part of the initiative. As weve seen, DCG wanted to pull the rugby themselves. On March 10, after Grayscale Bitcoin Trust GBTC continued to have a negative premium for several days, DCG announced a GBTC purchase plan of US$250 million.
Once there is a large amount of funds to buy in the secondary market, the price of GBTC will rise. If GBTC returns to a positive premium, there may be a large number of qualified investors participating again. In addition, DCGs announcement will also have an impact on market sentiment.
Judging from the judging criteria of the traditional financial market, DCG is suspected of manipulating the market. DCG and Grayscale have the ability to manipulate the market, but as mentioned above, Grayscale is also being checked and balanced by competition among similar funds, ETFs, and ETP products.Giant intervention and passive bull market
