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Grayscale's 33% GBTC Premium Signals “Outrageous” Institutional Demand For Bitcoin, says Willy Woo

Grayscale Bitcoin Trust’s (GBTC) premium on Bitcoin has risen to 33%, indicating “outrageous demand” for Bitcoin from institutional investors as the Bitcoin price consolidates below $23,000.

As the Bitcoin price rallied yesterday, the premium on GBTC shares rose to over 33%, drawing the criticism of Bitcoin critic Peter Schiff on Twitter, while on-chain analyst Willy Woo celebrated Bitcoin’s growing institutional demand.

CEO and chief global strategist of Euro Pacific Capital Inc, Peter Schiff has long been critical of Grayscale’s GBTC and the investment firm’s advertisements on CNBC. As Bitcoin surged he tweeted:

“CNBC viewers are now paying a 33% premium for the privilege of paying GBTC a 2% per year fee to store Bitcoin that they could easily store themselves for free. GBTC then creates new shares which it sells into the market at a huge premium, using the proceeds to buy more #Bitcoin.”

Woo, who goes under the Twitter handle Woonomic, could not have been more thrilled with the bullish institutional sentiment for Bitcoin and threw a jab at Schiff for his relentless diatribe on legacy safe-haven asset gold.

Woo wrote:

“Wow 33% GBTC premium, that’s outrageous demand for #Bitcoin via retirement IRA […] If I was a Euro Pacific shareholder I’d be wondering why the company is not getting in on that obvious growth business. Like Kodak revolutionised photos until one day it didn’t run towards digital.”

GBTC demand is rising as it allows institutional exposure to Bitcoin which is held in custody and also allows investment strategies to not have to deal with the complications of crypto taxation.

As one of Woo’s followers posted in the thread:

“I’m surprised premium is only 33%. Roth IRA exposure to bitcoin and one does not need concern about tax…. so right around 30% seems correct to me. I can see premium getting to 100% for GBTC as retirement accts try to purchase GBTC shares and are not immediately filled.”

GBTC Premium

To clarify, the premium placed on Bitcoin is not applied by Grayscale itself but is priced in by the United States public market where GBTC shares trade.

Each share from GBTC represents 0.00095085 BTC or roughly 0.095%. At the time of writing on Dec. 18, GBTC is trading at $28.25 across retail and spot markets. Following its historic rally, Bitcoin is trading at around $23,105, which makes 0.095% of 1 BTC worth around $22. This means that GBTC is roughly 33% more expensive than buying Bitcoin and storing it yourself.

While Willy Woo is correct that when the premium rises, it signals that more institutions and accredited investors are accumulating BTC via GBTC, and is obviously a bullish indicator of market sentiment—Schiff’s concerns are not without substance.

Currently Grayscale is holding $12.9 billion in Bitcoin up from just over $10 billion at the start of December. As Schiff tweeted, GBTC creates these shares which are sold to the market at a huge premium and reinvested to buy more Bitcoin.

Should the Bitcoin price plunge, GBTC’s investment strategy could have dangerous consequences for the overall market. Should the value of Bitcoin price drop investors may exercise their put options and create a situation in which the failure of the Grayscale Bitcoin Trust, could cause cascading effects into other financial networks and create serious issues for the BTC price.

A put is an options contract that gives the owner the right, but not the obligation, to sell a certain amount of the underlying asset, at a set price within a specific time. For this right, GBTC investors pay a premium.

Schiff also suggested that Grayscale’s premiums were far too high just for custody services. He tweeted:

“That’s what hedge funds charge to manage money. The fees to merely custody an asset are normally around 20 basis point, 1/10 of what GBTC charges.”

Grayscale AUM up $3.4 Billion in a Week, $500 Million in a Day, GBTC 33% Premium Shows High Bitcoin Demand

Institutional-grade digital asset manager, Grayscale Investments is up $3.4 billion in assets under management (AUM) over the last week, bringing its total AUM to $16.4 billion.

On Dec. 15, Grayscale announced in a tweet that the digital asset manager was holding around $13 billion in AUM. Just a week later, Grayscale has announced an incredible growth of $3.4 billion.

Barry Silbert, Founder and CEO of Digital Currency Group which is the parent of Grayscale, shared the data on Twitter, commenting on Grayscale’s incredible growth in AUM over the last 24 hour period.

“Boom. +$500 million in one day”

Data tweeted by the digital asset management firm show that its largest holding are still in Bitcoin and the Grayscale Bitcoin Trust has $14.1 billion in the top cryptocurrency.

In addition, Grayscale has $1.81 billion AUM in its Ethereum Trust, $125 million in Litecoin, $70.7 million in Bitcoin Cash, $67.7 million in ETC and smaller holdings in XRP, XLM, and ZCASH.

33% GBTC Premium on Bitcoin Signals Demand

Bitcoin’s price plunged to under $23,000 in the past 24 hours, before recovering to trade at the highs again above $24,000. The world’s largest cryptocurrency has seen slight volatility, and has dropped back down below the $23,000 level, before gaining strength to trade at $22,873 at press time.

As the market produces less volatility and moves sideways, shares in GBTC have fallen to 28.88 USD −1.51 (4.97%). However, despite the drop in price, GBTC’s premium on Bitcoin remains at around 33% indicating that institutional demand for Bitcoin remains very high.

Arguably the most widely known investment product of digital asset industry, Grayscale’s Bitcoin Trust (ticker: GBTC), has evolved into the de facto indicator of Bitcoin’s market sentiment. One of the most interesting aspects of GBTC has been its premium over Bitcoin’s price, currently at a level of 33%.

In the nascent and volatile world of Bitcoin and cryptocurrency, the premium is the amount institutional and professional investors are willing to pay to not have to take custody of their own private keys, but still, get exposure to the underlying crypto asset.

GBTC sold at a similar premium last week, and crypto analyst Willy Woo, who goes under the Twitter handle Woonomic, could not have been more thrilled with the bullish institutional sentiment for Bitcoin.

Woo wrote:

“Wow 33% GBTC premium, that’s outrageous demand for #Bitcoin via retirement IRA”

To clarify, the premium placed on Bitcoin is not applied by Grayscale itself but is priced in by the United States public market where GBTC shares trade.

GBTC is a stock offered on NASDAQ or any United States public stock exchange that holds Bitcoin as its primary asset. It is also one of the few choices for investing in bitcoin without buying the asset directly. Each share contains 0.00095054 BTC and is currently selling for 28.88 per share.

This means that if an investor were to buy enough GBTC shares to equate to a whole Bitcoin, it would cost them around $30,421 a 33% increase on the BTC price of $22,873 at the time of writing.

Grayscale Files with US SEC to Convert GBTC Into Bitcoin Spot ETF

Grayscale Investments LLC, the world’s biggest digital currency asset management firm, has filed with the U.S. Securities and Exchange Commission (SEC) to convert its Grayscale Bitcoin Trust (GBTC) into a physical or spot-based Bitcoin ETF.

Michael Sonnenshein, the CEO of Grayscale, made such an announcement in an interview on Tuesday, October 19, stating that the company is “100% committed to turning GBTC into an ETF as soon as U.S. regulators allow.”

“We are of the firm belief that because the futures and the spot pricing for Bitcoin are inextricably tied, that we have the willingness to allow or clear the way for a Bitcoin futures ETF in the market, and also clear the way for a spot ETF,”

The move by Grayscale comes after the SEC approved the launch of a Bitcoin futures ETF to trade, with ProShares Bitcoin Strategy ETF beginning its trading on Tuesday.

Grayscale is aware of the conversion that would help the firm resolve persistent problems it has been facing in the past. Launching a physical Bitcoin ETF would solve the current less liquid option, Bitcoin fund (Grayscale Bitcoin Trust – GBTC).

The trading of a Bitcoin spot ETF would also address the trust’s discount as Grayscale, in many cases, has been selling Bitcoin below the net asset value. The GBTC’s price has traded below its underlying Bitcoin holdings for a prologued period because shares in the product can’t be destroyed in the same way as they are in an ETF.

Also, Grayscale Bitcoin Trust may lose its relevance as the beginning of Bitcoin futures ETF’s trading threatens to draw assets away from a product that investors have tolerated because of the lack of an alternative.

In the past, Grayscale has frequently talked about its plans to convert its GBTC and its other 14 crypto trusts into ETFs.

As reported by Blockchain.News in July, Sonnenshein stated that he expects all of the fund group’s products to one day become ETFs as soon as regulations allow for such conversions.

Grayscale wants its ETF to be backed by actual units of the cryptocurrency, not just linked to it via derivatives contracts like the futures.

If the SEC approves the application, it could further expand the leading crypto trading as a recognized investable asset.

However, some analysts feel that the chances of Grayscale’s physical Bitcoin ETF getting approved soon is small, given that SEC chairman Gary Gensler has frequently signed his preferences for futures products that provide more protection to investors.

Grayscale looks forward to expanding its product offerings to make digital assets more accessible to both retail and institutional investors.

Digital Currency Group Raises $700M at $10B Valuation

The Digital Currency Group (DCG) has announced its latest secondary share sale, in which it pulled about $700 million in funding.

The funding round was sparked by a wave of existing investors who sold their shares to the new investors. However, DCG Founder and CEO Barry Silbert confirmed he did not sell any of his shares in the latest round.

Prominent investors include Softbank Group Corp’s Vision 2 Fund, Ribbit Capital, GIC Capital, and Latin American Funds. The secondary share sale was also embraced by Alphabet Inc’s CapitalG, marking a grand first-time investment into the company with a plethora of investment portfolios.

Digital Currency Group operates the Grayscale Investments who administers the Grayscale Bitcoin Trust (GBTC), a $50 billion that the company said it wants to turn into a full-fledged Exchange Traded Fund (ETF) product, subject to regulatory approval. DCG group is known for its investment in more than 200 blockchain and crypto-related firms, putting it at the forefront of fueling innovation in the digital currency ecosystem.

“We’re the best proxy for investing in this industry,” Silbert told CNBC in an interview. “We were looking for the type of backers that could be, and hopefully will be with, with us on this journey for the next couple of decades.”

The latest funding round places the Digital Currency Group at a $10 billion valuation. The company now ranks alongside blockchain payments firm Ripple Labs Inc, Kraken Exchange, and Circle as one of the most profitable private crypto companies in the United States and the world at large.

Investments in cryptocurrency-focused outfits are no longer an uncommon event today. Huge cash from mainstream institutional investors is flowing into the industry as hedge funds and venture capitals seek to gain exposure to the growing crypto ecosystem in the most legal and risk-free manner. Outfits like DCG and FTX remain trusted channels to meet most investors’ goals for venturing into the crypto industry.

Image source: bussinesswire.com

Grayscale Debuts First European ETF

Grayscale Investments has announced the launch of its first exchange-traded fund (ETF) product in the European Economic Area.

According to a press release published by the firm, the new ETF product is dubbed the Grayscale Future of Finance UCITS ETF. This product will trade under the GFOF ticker symbol and will be featured on three leading exchanges in the region including the London Stock Exchange (LSE), Borsa Italiana, and Deutsche Börse Xetra.

Grayscale is one of the world’s top leaders in digital asset management and product development. The European ETF is an analogue of its earlier product launched in the US which tracks the performance of the Bloomberg Grayscale Future of Finance Index. This index seeks to expose investors to firms at the baseline of finance, technology, and cryptocurrency evolution respectively.

“We announced our first ETF earlier this year in partnership with Bloomberg as part of the expansion of our business. With growing global demand from both institutional and individual investors for Grayscale products, we’re thrilled to be expanding our offering in Europe through the UCITS wrapper,” said Grayscale Investments CEO Michael Sonnenshein.

“This product draws upon our historical strengths while furthering our evolution as an asset manager that helps investors build portfolios that can stand the test of time. GFOF UCITS ETF is the natural next step in our global strategic journey.”

Grayscale comes off as one of the leading firms working assiduously to float a Bitcoin spot ETF product in the United States and while the Securities and Exchange Commission has made the company and others’ efforts in this regard to be futile, it has refused to give up on its goal.

Grayscale Investments, owned by the Digital Currency Group plans to convert its flagship Grayscale Bitcoin Trust (GBTC) product into a full-fledged ETF and it is determined to get a green light from regulators

Grayscale Wants SEC's Approval for Bitcoin ETF With Public Support

Grayscale Investments is stirring the public to send a message to the United States Securities and Exchange Commission (SEC) with respect to approving the conversion of its flagship product, the Grayscale Bitcoin Trust (GBTC) to a full-fledged spot Bitcoin Exchange Traded Fund (ETF).

As reported by Axios, the world’s largest digital assets manager has taken over the Washington, D.C.’s, Union Station with one message: “We care about crypto investors.” The message comes in the form of an advert with a QR Code which when scanned, will lead users to a message board where they can advocate for the approval of the company’s conversion request as the July 6th deadline looms.

The United States SEC has been adamant in rejecting several applications for a spot Bitcoin ETF product despite other advanced economies having access to similar products. Many advocates have refiled their applications while a number of companies have pulled theirs with the likelihood of gaining approval slimmer than one can project.

While the GBTC product is very popular amongst investors, and Grayscale Investments believes the product should have a smooth transition, it is optimistic that public advocacy as it is sponsoring can further get to the SEC and its pilots led by Gary Gensler.

Grayscale CEO Michael Sonnenshein has also threatened to sue the SEC should the outcome of the anticipated decision turn out to be ‘NO’. Speaking to Axios, Sonnenshein said his firm’s “..priority will always be advocating for investors, and this campaign embodies that commitment.”

In a massive consensus move, the SEC approved a number of Bitcoin futures Exchange Traded Fund products starting with ProShares last year. The logic remains that if the SEC can grant approval for a futures product, it should be able to do the same for a spot product as the industry has continued to allay some of the regulator’s primary fears.

Grayscale Taps Top Former Obama's Lawyer in Preparation for Spot BTC ETF Legal Battle

Grayscale Investments LLC has hired Donald B. Verrilli Jr to enhance its legal team, who was a solicitor general under the Obama administration from 2011 to 2016.

The United States Securities and Exchange Commission (SEC) is expected to announce its final decision next month for the application of the conversion of Grayscale Bitcoin Trust (GBTC) to a spot Bitcoin Exchange Traded Fund (ETF) filed back in October last year by Grayscale Investments LLC.

In preparation for this historic verdict, the company has onboarded Donald B. Verrilli Jr as the latest member of its legal team. Verrilli’s reputation precedes him, and he has a lot of years as the Solicitor General during the Obama Administration, a position he held from 2011 to 2016.

The move by Grayscale aligns with the company’s plans to be adequately prepared for whatever outcome it will get from the SEC which in this case is narrowed down to either a ‘Yes’ or a ‘No’. As notably insinuated by CEO, Michael Sonnenshein, getting a No as an answer may ignite a legal action in which the firm plans to sue the SEC.

“It’s paramount that Grayscale has the strongest legal minds working on our application to convert GBTC to an ETF, and we are thrilled that Verrilli will join our outstanding legal team,” a Grayscale spokesperson said, underlining Verrilli’s long experience before the high court, including major wins defending the Affordable Care Act and legal recognition of same-sex marriage.

A lot of asset and investment managers have received rejections to their applications from the SEC with the latest being Fidelity Investments and One River Digital Asset Management respectively. While the majority of pundits might predict another rejection on the way for Grayscale, the firm is notably more enthusiastic it is going to get a Yes, breaking history as the very first in the United States to be granted such approval.

In the runup to July 6, Grayscale said it is preparing the GBTC products so they can easily be converted into a spot ETF should the SEC come through with a positive decision.

Grayscale Goes to Court After SEC Rejects its Proposed ETF Bid

The United States Securities and Exchange Commission (SEC) dashed the hopes of Grayscale Investments with a rejection of its application to convert the Grayscale Bitcoin Trust product to a full-spot Exchange Traded Fund (ETF).

In response, the investment asset manager has filed an appeal with the United States Court of Appeals for the District of Columbia Circuit where it will argue that the regulator violated the Administrative Procedure Act (APA) and Securities Exchange Act of 1934.

The SEC’s rejection is predicated on the fact that there is no trusted system with which to prevent fraud, the same position it has hinged its past rejection decisions on. The swift appeal filed by Grayscale is because it was prepared for this sort of action as Chief Executive Officer, Michael Sonnenshein had promised lawsuit months prior to when this final decision was expected.

“Grayscale supports and believes in the SEC’s mandate to protect investors, maintain fair, orderly, and efficient markets and facilitate capital formation — and we are deeply disappointed by and vehemently disagree with the SEC’s decision to continue to deny spot Bitcoin ETFs from coming to the U.S. market,” Sonnenshein said.

The company tapped Donald Verrilli, a top Solicitor under the Obama Administration as a part of its legal team back in June. Verrilli will now be leading the charge against the SEC, arguing that the fact that there are Bitcoin Futures ETFs running on US exchanges invalidates the lack of trust in the safety of the ecosystem that the SEC hinged its decisions on.

“This is a place where common sense has a really important role to play. You’ve got a situation now in which you have certain kinds of exchange traded funds, one that is focused on bitcoin futures, and the SEC has approved that, the SEC is given it the seal of approval,” he said to reporters back in June. “In order to do so it had to make a determination that that giving this approval was consistent with the securities laws, and in particular, that that there wasn’t a sufficient underlying risk of fraud and manipulation.”

The timeline of the appeal is yet to be unveiled, but this may be yet another long-drawn legal battle between a crypto-native firm, and the US SEC after Ripple Labs Inc.

GBTC's Discount to NAV Hits New Record Low after SEC Declining its Bitcoin Spot ETF Application

The shares of the Grayscale Bitcoin Trust (GBTC) saw a new record low of -31% last Thursday, June 30; that is, GBTC’s discount hit -31%, its lowest point in history.

The discount means the market price of GBTC shares is over 31% lower than its net asset value (the value of the underlying Bitcoin).

Before the news regarding U.S. Securities and Exchange Commission (SEC) ‘s rejecting Grayscale’s application to turn its GBTC instrument into an ETF last Wednesday, the GBTC discount was 28.4%.

Investors in the Grayscale Bitcoin Trust (GBTC) face more losses as the popular investment product widens its record discount.

GBTC has long been an investment product of choice for several institutional investors, providing them exposure to Bitcoin without the need to buy the underlying asset.

However, the offering has many drawbacks, including a six-month lockup period and an annual management fee of 2%.

There are several factors behind the poor performance of GBTC. The current discount potentially means a weakening interest in the asset, as there is more GBTC supply than demand. This indicates a bearish signal of broader institutional sentiment towards Bitcoin. Furthermore, new competitive products in the market, like Canadian Bitcoin exchange-traded funds (ETFs), also give new alternatives to investors.

GBTC’s record low comes as Bitcoin struggles below the $20,000 mark. The crypto market has extended its losses as several major crypto coins are in a bloodbath. Bitcoin was trading at $19,080 per coin during the Asia trading sessions on Monday local time. Wider cryptocurrencies have further plunged as investors maintained a panic selling after the recent liquidation of crypto hedge fund- Three Arrows Capital (3AC).

Further Road Ahead

Grayscale considers the conversion of GBTC into a Bitcoin ETF as the best solution. The company recently said it is “100% committed” to turning the investment product into a Bitcoin ETF. However, it appears that the regulatory environment in the U.S. is still not ready.

Last week, Grayscale sued the SEC a few hours after the regulator rejected its application to convert its flagship Grayscale Bitcoin Trust product (GBTC) to an exchange-traded fund (ETF).

Last Wednesday, the SEC turned down Grayscale’s application for a spot Bitcoin ETF, citing the investment management firm’s failure to answer questions about market manipulation concerns. The regulator is concerned investors would lack adequate protections under the Grayscale proposal.

In the past, Grayscale had piled pressure on the regulator to side with its application. In early May, Grayscale met privately with the SEC to persuade the watchdog to approve the conversion of its GBTC into an ETF.

Converting the Grayscale Bitcoin Trust into a NYSE-traded exchange-traded fund (ETF) would widen access to Bitcoin, enhance protections, and unlock up to $8 billion in value for investors. And a discount would disappear upon conversion, that is, according to Grayscale.

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Grayscale Has Strong Case against SEC: Chief Legal Officer

A legal official of Grayscale Investment said the company has confidence in a lawsuit against the U.S. Securities and Exchange Commission (SEC). The company is struggling in a legal battle with SEC for applying to convert its Grayscale Bitcoin Trust (GBTC) product to a spot Bitcoin ETF.

For many that might have been wondering whether Grayscale Investments has a chance against the United States Securities and Exchange Commission (SEC) whom it dragged to the Court of Appeals, the company’s Chief Legal Officer (CLO), Craig Salm has affirmed that the case the firm has against the regulator is a solid one.

Grayscale initiated a lawsuit last month when it received a rejection decision with respect to its application to convert its Grayscale Bitcoin Trust (GBTC) product to a spot Bitcoin Exchange Traded Fund (ETF). Drawing on the success of the GBTC product amongst investors, Grayscale said it has hoped to step up the designation, and regulatory provisions of the product by upgrading its status.

The SEC, however, did not see the company’s ways and like other notable Bitcoin ETF rejections, the regulator said it has issues with how the price for the spot BTC ETF will not be subject to manipulations. To back its Petition for Review filed with the Appellate Court, Craig said that the SEC is contradicting itself considering it has previously approved a slew of Bitcoin Futures ETF in the US.

To Grayscale, both Bitcoin Futures and Spot Bitcoin ETFs derive their prices from spot Bitcoin making them very similar. In an expository Q&A, Craig said the timeline for the completion of this legal brawl is indeterminate, but from precedent, it may take as much as 12 to 24 months.

“We can’t be certain about timing, but based on how long federal litigation tends to take – including briefings, oral arguments, and a final court decision – it can typically take anywhere from twelve months to two years, but could be shorter or longer. However long it takes, we believe the strength of our arguments should result in a final decision in our favor at the D.C. Circuit Court of Appeals,” he said.

Grayscale is one of the few firms that report its products to the SEC and Craig confirmed that the lawsuit will not alter its working relationship with the regulator. Its confidence in beating the SEC is hinged on its strong case and the prowess of renowned solicitor, Donald B. Verrilli whom the firm recently onboard as a part of its legal team.