Following the recent bitcoin price pullback, the latest Skew data now indicates that the premium rate on Grayscale’s GBTC is under 10%. The lower rate comes just weeks after the premium peaked at 41% towards the end of December. The GBTC premium is a measure of the extent of differences in the value between the crypto asset on the open market and in the Grayscale fund.
The same data also shows that between late October of 2020 and January 21 of the current year, this premium averaged 22%. However, in the seven days leading up to January 21, this rate dropped to 7.3%. According to Bohdan Prylepa, the CTO at Prof-it.bz, this “decrease indicates the sale of shares by some investors after the end of the freeze period.” This is in contrast with a rising premium, which according to the CTO, is an indication of “high demand for GBTC.”
Dropping Demand for GBTC
Also agreeing with Prylepa’s view is Justin Barlow of Thetie.io, who goes on to add that “GBTC has traded at a premium to the underlying bitcoin in all but one day since launch.” He suggests that individual “investors who are aware of the premium might be confident that it will continue and knowingly hold GBTC shares.
However, Barlow speculates the reasons behind the drop in premium from over 40% to current levels. According to him one of the reasons could be:
“Institutional and accredited investors who basically placed an arbitrage trade on the premium (short the underlying bitcoin and buy GBTC) having to close out their positions (buyback bitcoin and sell GBTC) causing downwards pressure on the premium.”
Barlow also suggests other factors such as “retail demand leveling off after the recent bitcoin dip” as well as competition from rival products such as 3iq or Osprey’s Bitcoin Trust could be behind the drop.