Bitcoin Price Shatters $11,000 on GBTC’s 37% Premium Over Skyrocketing Demand

In the past month, within a 30-day span, the bitcoin price has surged 60 percent against the U.S. dollar to about $8,500 as the valuation of the crypto market rose by $100 billion.

Major crypto assets such as ethereum, litecoin, and EOS have seen gains above 100 percent year-to-date, with Binance Coin, the seventh most valuable crypto asset in the global market, recording a staggering 437 percent gain against the USD.

GRAYSCALE’S GBTC TRADING AT 37% PREMIUM

As the bitcoin price surged, the assets under management of Grayscale, an investment firm overseen by Digital Currency Group, arguably the most influential venture capital firm in the sector with companies like Coinbase, BitFlyer, Blockchain, Circle, Kraken, Xapo, and Zcash, has surpassed the $2 billion mark.

In April, Barry Silbert, the CEO of Digital Currency Group, revealed Grayscale’s assets under management hit $1 billion.

In less than two months since achieving $1 billion in AUM, primarily due to the noticeable increase in institutional demand and interest from retail investors, the investment firm has achieved $2 billion in short succession.

Grayscale operates some of the most widely utilized crypto asset investment vehicles used by accredited and institutional investors to invest in the crypto market in a strictly regulated and transparent environment.

Bitcoin Investment Trust (GBTC), Grayscale’s flagship investment vehicle that enables investors to buy or sell bitcoin through a stock exchange, has shown a premium of around 37 percent in the past several days.

Bitcoin Investment Trust hits $11.44

Bitcoin Investment Trust hits $11.44 (source: Yahoo Finance)

Each share of GBTC represents 0.00098247 bitcoin and a share is valued at $11.44. On major exchanges like Coinbase and Bitstamp, 0.00098247 is equivalent to $8.35.

If an investor is to buy one full bitcoin on GBTC, it would cost well over $11,000 due to the premium on the vehicle.

WHAT DOES THE BITCOIN PRICE PREMIUM SUGGEST?

GBTC has always shown a premium over exchanges because it operates under the guidance of a stock exchange in OTC Markets, regulators, and auditors. It is a strictly regulated vehicle that enables investors to invest without having to allocate additional resources for security and protection.

The 37 percent premium on the GBTC indicates that the interest towards the dominant cryptocurrency from institutions and accredited investors is evidently rising and that the abrupt increase in the bitcoin price in recent weeks have started to appeal to many investors.

On May 10, Silbert stated that GBTC was the most actively traded stock on OTC Markets with a daily volume of over $50 million, demonstrating a spike in interest around the asset class.

“Trading volume on Grayscale Bitcoin Trust (symbol: $GBTC) exceeded $50 million today and was again the most actively traded stock on OTC Markets,” Silbert said.

The AUM of GBTC alone has grown to $1.2 billion in the past two months, indicating a rise in the inflow of capital from accredited investors to bitcoin.

Earlier this month, Grayscale saw a 42 percent increase in capital inflow quarter-over-quarter in the first quarter of 2019.

“Grayscale experienced a 42% uptick in product inflows quarter-over-quarter, from $30.1 million in 4Q18 to $42.7 million in 1Q19. Notably, hedge funds ramped up their investments substantially, from less than $1 million in 4Q18 to approximately $24 million in 1Q19.”

While analysts generally anticipate a pullback to hit the crypto market in the near-term, the momentum of bitcoin and the rate in which new capital seems to be flowing into investment vehicles like GBTC would be difficult to dismiss.

 

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