Bitcoin and GBTC premium

[brainactive]

GBTC is currently trading at a 20% discount to NAV. From an institutional fund manager's perspective, seems like they can take advantage of this by:
- Sell 1 BTC at spot price
- Buy 1.2 BTC worth of GBTC shares at the discounted price

This would put downward pressure on BTC price due to sell pressure on spot.

Does that mean we are unlikely to see a bitcoin recovery until GBTC premium goes above 0%?

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[magneto]

You're confusing cause and effect here.

The fact that BTC is projected to be in a protracted bear market from this point onwards is the reason for the discount to NAV. As such, the only thing that could catalyse a reversion to a 0% discount/fair value for GBTC would be a bull market.

Institutional fund managers aren't dumb. They wouldn't mistake a GBTC trust with 1:1 guaranteed exposure to BTC - so the arbitrage forces would probably also be missing there.

[Tytanowy Janusz]

Here you can find whole article that will answer your question.
https://cointelegraph.com/news/gbtc-premium-stays-negative-suggests-bitcoin-price-sentiment-still-low
https://cryptocurrencyfacts.com/the-gbtc-premium-explained/

In simple words - There are many things that are constantly lowering premium. For example more legit places to reach BTC exposure for institutional investors or found maturing.

Will we see arbitrage trading to compensate 20% discount? Most likely Grayscale take care of it by reducing supply of fund units together with dumping some BTCs. But grayscale is not the only player here and as previous poster stated - as soon as we will see recovery discount will turn back to premium.

[slaman29]

You're confusing cause and effect here.

The fact that BTC is projected to be in a protracted bear market from this point onwards is the reason for the discount to NAV. As such, the only thing that could catalyse a reversion to a 0% discount/fair value for GBTC would be a bull market.

Institutional fund managers aren't dumb. They wouldn't mistake a GBTC trust with 1:1 guaranteed exposure to BTC - so the arbitrage forces would probably also be missing there.

I've always wondered what they do to get that arbitrage. Someone in reddit was saying they're just putting it all into those Cefi high yields and which are always adjusting their interests as well. A whole big circle of people loaning each other capital trying to find people to borrow from them at higher rates. But that's a lot of maybes that we don't know about.

[Baofeng]

GBTC is currently trading at a 20% discount to NAV. From an institutional fund manager's perspective, seems like they can take advantage of this by:
- Sell 1 BTC at spot price
- Buy 1.2 BTC worth of GBTC shares at the discounted price

This would put downward pressure on BTC price due to sell pressure on spot.

Does that mean we are unlikely to see a bitcoin recovery until GBTC premium goes above 0%?

I don't think it work that way, whales or institutions who bought GBTC and locked in for 6 months has it on premium price already. So there's no such thing as a discounted price here.

On the contrary, they can lose profits if they try to arbitrage it as the current price. So better not to sell it and wait for the right or shall I say ripe situation to sell it at spot.

[DeathAngel]

I think the downward pressure on the market at the moment COULD be because of weak hands who are fearful of this. GBTC unlock is over next week so hopefully we resume upwards price trajectory then.

[Dave1]

I think the downward pressure on the market at the moment COULD be because of weak hands who are fearful of this. GBTC unlock is over next week so hopefully we resume upwards price trajectory then.

There will always be weak hands in the market, and I thought though that they have exited already when the price goes down below $50k. I think the selling off comes from a more experienced traders and investors. And because of the news, they sell and then wait for the bottom again buy.

But as I have said previously, most GBTC bought it at a premium and this are smart investors. They won't simply going to sell because (1) they know that the market will be affected drastically (2) the profit margin for them is small.

[Tytanowy Janusz]

According to cointelegraph the unlock take place today:

Sunday, July 18, is of particular interest, with that day’s unlocking worth just over 16,000 BTC.

My guess it that any sell pressure (if any) will be eaten by those who sold before this event to trade it. Its how market works. Buy rumours sell facts. After unlock there will be nothing more to worry about. We will begin Taproot activation narrative and fomo (activation take place mid-November 2021).

[Jating]

According to cointelegraph the unlock take place today:

Sunday, July 18, is of particular interest, with that day’s unlocking worth just over 16,000 BTC.

My guess it that any sell pressure (if any) will be eaten by those who sold before this event to trade it. Its how market works. Buy rumours sell facts. After unlock there will be nothing more to worry about. We will begin Taproot activation narrative and fomo (activation take place mid-November 2021).

Yes, we just need to be patient and not to panic and wait till this is over. I think the sell pressures happened when the price reaches $31k, but then we are now recovering just a hundreds of dollars. Might be good to see $32k tomorrow.

And once this is completed, there will be no selling pressures and on the contrary, many should be buying because the price is cheap at $31k-$32k. So just a little patience or our part and we are good to go again.

[adaseb]

The reason why the premium is so large is because you cant redeem the GBTC for BTC....yet

If they announce a way (no idea how its possible) to convert your GBTC for BTC directly then the premium will disappear. However now its a one way street. BTC goes into GBTC but not the other way around. So I dont think too many people will take advantage of this arbitrage here because it seems risky. Especially with that large fee they are charging.

From what I read, they might get some ETF approved in the near future (somehow) and they will allow the GBTC to be converted to the ETF which would be very close to spot. However no idea when that will be.

So right now at the moment. Nobody wants to start this arbitrage which can last years...

[zanezane]

I think the downward pressure on the market at the moment COULD be because of weak hands who are fearful of this. GBTC unlock is over next week so hopefully we resume upwards price trajectory then.

It's good that there's weal hands in the market because I really want to buy some bitcoin at a really low price. There's no worry when will this upwards price trajectory happen because it will although don't put some hope that it will happen this month or the next because I feel like the unlock is going to make the prices stay at a certain point for awhile.

[palle11]

I think the downward pressure on the market at the moment COULD be because of weak hands who are fearful of this. GBTC unlock is over next week so hopefully we resume upwards price trajectory then.

It's good that there's weal hands in the market because I really want to buy some bitcoin at a really low price. There's no worry when will this upwards price trajectory happen because it will although don't put some hope that it will happen this month or the next because I feel like the unlock is going to make the prices stay at a certain point for awhile.

Fear is still a reason that the price keeps sloping to towards. Hodlers expecting bull especially newbies who don't understand the terrain of cryptocurrency movement. For some who have witnessed the long Hull of bear that happened in 2018 and just came off last year during the start of covid-19, we already seen it all. The bull isn't going to happen this month or next, it will give chance for accumulation which will steer the next movement up. For now, investors are still making investment decision.