Grayscale’s Bitcoin spread fees drop to record lows below zero

Grayscale Bitcoin Trust (GBTC) is currently the largest crypto asset listed, managing $ 30.17 billion in assets. The company currently holds more than 655,730 BTC and its securities are tradable in the United States through the OTC markets.

How is GBTC different from a Bitcoin ETF?

The fund was launched in 2013, and the Grayscale Bitcoin Trust has become the preferred BTC approach for institutions in the United States due to the lack of an exchange Bitcoin exchange fund (ETF).

Investment trusts are regulated by the Office of the United States Monetary Control Authority (OCC) and designed exclusively for certified investors. However, they can be sold to retail traders after a 6 month lockout period.

This special feature makes GBTC shares trade on the equivalent amount of BTC held by the trust whenever there is a need to retail on the secondary market. Meanwhile, institutional clients can buy parity directly from Grayscale Investments regardless of the price in the OTC market.

Fees of the difference on the Grayscale Bitcoin Trust (blue) vs. the Marker price (green) | Source: By Bypass.com

As mentioned above, such spreads sometimes exceed 40%, indicating a great deal of buying pressure from investors. The situation has changed over the past 4 weeks as Bitcoin’s price peaked at $ 58,000 and began to adjust significantly, causing GBTC spread fees to fluctuate between 5% and 10%.

Declining demand in the secondary markets creates a potential imbalance as there is currently no program to buy back GBTC. If there was a way to convert it back to BTC, a market maker would be willing to buy trust shares at a discount.

Fees for differences from NAV | Source: YCharts.com

While the recent price crash could justify the 7% discount seen on Feb. 26, Bitcoin has faced multiple 30% corrections in the past with no apparent impact on fees. GBTC difference. Even in the terrible bear market at the end of 2018, GBTC was trading above its net asset value (NAV).

New challenge

While no better alternative was offered in the past, Canada’s TSX launched a Bitcoin ETF on Feb. 18, offering investors the opportunity to get in-person with BTC. This structure allows the market maker to create and redeem stocks, thereby minimizing the spread or final discount on net asset values.

During this time, selling pressure took place and resulted in less buying from non-certified investors. On the other hand, the Canadian Purpose Investments ETF surpassed the 10,000 BTC managed asset mark in 1 week, signaling the instrument’s success despite the sharp drop in BTC price.

Unless Grayscale Investments opens a buyback program, nothing prevents GBTC from continuing to trade below its net worth.

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