The premium for Grayscale Bitcoin Trust recorded a sharp increase on May 25, reflecting an upswing in demand among institutional investors. The premium traded at a discount in the past few months due to retail demand flowing into cheaper products, including Canada’s approved Bitcoin exchange-traded funds (ETFs).
Grayscale Bitcoin Trust Sees Rebound
Since February, Grayscale Bitcoin Trust (GBTC) has traded at a discount to its net asset value as new competition weighed in.
The decline in fresh funds came amid new competitive funds launching in Canada, Europe, and Latin America, and several filings for Bitcoin ETFs in the United States.
With Canadian competitors taking up the market share of the U.S amid the latter yet to approve any ETFs, institutional inflows were drying up fast leaving the fund’s premium trading at a discount until now.
After plummeting to a multi-year low of -21% on May 13, the lowest point in the fund’s history, the cryptocurrency fund has normalized quite a bit to -3.8% shortly before Bitcoin’s massive correction. Interestingly, GBTC was trading at a premium upwards of 30% at the beginning of the year.
The recent launch of Simply US Equity PLUS GBTC ETF that invests 15% of the portfolio in Bitcoin through the trust has helped in lifting its premium out of the sky-high discounted territory.
GBTC Offers Investors to Gain Exposure in BTC
Historically, Grayscale Bitcoin Trust has always traded at a premium to Bitcoin. Despite investors buying the shares that cost more than the underlying asset, it also allowed them to cash out at a premium.
The trust offers accredited investors to gain exposure to the digital asset without holding the actual currency followed by a six-month lock-up.
Once the lock-up expires, investors can sell the shares on the secondary market to retail investors for a premium. The proceeds they receive are then used to pay back the lender for borrowed coins.
Despite GBTC’s high management fees and long redemption periods, investors had to accept the cryptocurrency fund due to a lack of options in the market.