How did the high premium of Grayscale Trust BTC come from?
Hello, here is the 8 minute blockchain,
Today we will analyze the company Grayscale again. I said in the program yesterday that Grayscale is currently the largest brand-name banker in the currency circle, and it is also the largest regular investment investor in this market.
In fact, the real identity of Grayscale is more than that. The profile of DCG Group, the parent company of Grayscale, is also the largest miner in North America. The coinbase invested by Grayscale is also the transaction with the largest amount of bitcoins held in the world. As of today, Grayscale The number of Bitcoins held by Coinbase is as high as 850,000, which is higher than the sum of Huobi, Binance, and OK. In addition, Grayscale also has its own lending platform, a media company, and has acquired an American commercial bank. Grayscale’s parent company, DCG, has invested in 150 blockchain-related companies.
Therefore, Huidu can be said to be the most well-deserved number one brand-name banker in the currency circle. Therefore, every move of Grayscale in the future is worthy of our attention.
Okay, let’s continue yesterday’s program to talk about the third arbitrage model of Grayscale; the third one is similar to the fourth one by directly buying two borrowed coins, and they are all arbitrage by shorting GBTC, investing Investors directly borrow GBTC shares and sell them in the secondary market at an appropriate time. At the same time, use cash or Bitcoin to exchange for GBTC shares in Grayscale, and repay the borrowed GBTC shares after the lock-up period. There are two fees involved here, one is the borrowing cost of GBTC, and the second is the 2% custody fee. If the GBTC premium exceeds the sum of the two fees, it is possible to make a profit.
To sum up the four arbitrage methods, the first case is more dependent on the current price of Bitcoin. The higher the price of Bitcoin, the higher the income. The second and third strategies are more dependent on the GBTC premium. The higher the premium, the more people who realize arbitrage, and the higher the demand for Bitcoin at this time. The fourth situation is very suitable for hedge funds. The operation is relatively complicated, but the premium income can be locked in advance, and the market risk it bears is small.
After talking about the way of arbitrage, the question arises again, why does GBTC have a high premium over the price of BTC for a long time?
Facts tell us that since GBTC can be traded in the secondary market, its share price has long been at a premium to BTC itself.
The premium is generated when the market circulation value of each GBTC > the value of the contained Bitcoin, for the following reasons:
1. The flexibility is small, there are no substitutes, and the threshold for institutions and qualified investors in Grayscale is relatively high. The minimum purchase amount is 50,000 US dollars. Even in the United States, people who can take out 50,000 US dollars are not necessarily Especially many.
However, GBTC in the secondary market is an ordinary stock. If this stock can rise, people will buy it. It will always exist, and spot buying will always exist, causing prices to continue to rise.
2. The U.S. stock market lacks investment tools for Bitcoin and encrypted assets. As long as the SEC has not approved the Bitcoin ETF, GBTC basically has no competitors.
3. The mechanism of GBTC’s regular sale, non-redeemability, 6-month lock-up period that cannot be resold, and the continued optimism of the market sentiment have resulted in a higher risk premium.
Two factors lead to the short supply of GBTC, resulting in a long-term premium of GBTC relative to the price of Bitcoin.
Which trust products of Grayscale have been registered with the SEC? (SEC)
In January 2020, Grayscale Bitcoin Trust applied for registration with the SEC, becoming the first digital asset tool that meets the standards of the US Securities and Exchange Commission; in April, Grayscale Bitcoin Trust officially came into effect; on August 6, Grayscale filed with the SEC Submit an Ethereum Trust registration application. On October 13, Grayscale Ethereum Trust has become its second digital currency investment vehicle to obtain a declaration permit.
At present, there is no relevant information on other trust products.
9. Why buy GBTC instead of Bitcoin directly?
This is the same logic as we buy gold in Alipay. It is very inconvenient for me to buy real gold. I have to buy insurance, which is expensive. I have to take it with me every time I move, and I have to prevent gold from being stolen and other risks. It's better to sell directly on Alipay. As long as I buy bitcoins, I will make money if the annual increase exceeds 2%.
The purpose of GBTC is to reduce asset management costs for investors. By purchasing GBTC directly in the US stock market, investors can purchase and hold Bitcoin in a simplified and safe manner with no learning threshold. While enjoying the investment opportunities brought about by the high volatility of bitcoin prices, there is no need to bear some risks that may exist in trading bitcoins by yourself:
1. There is a risk of information leakage when opening an account on a digital currency trading platform: Every day you may receive harassing calls from fake customer service of major trading platforms, and even your personal privacy may be stolen or used in violation of regulations.
2. Buying and selling bitcoins on digital currency trading platforms has risks such as price manipulation, restrictions on withdrawals, and "running away" by exchanges: opacity is a common problem of centralized platforms.
3. Storing bitcoins has risks such as wallet private key loss and theft. Also, GTBCs operate similar to stocks and bonds, providing investors with tax convenience and easy transfer to beneficiaries under estate law.
Question 6: Will Grayscale hit the market?
Looking at the historical data, we have not seen the situation of smashing the market. Grayscale is a brave man who can only get in and out. The currency that the position is reduced is the management fee deducted. For example, 1 million bitcoins, the management fee for one year is 20,000 A bitcoin, this money is already a lot of money in cash, 600 million U.S. dollars, and may grow to 1 billion U.S. dollars in the future. This is net profit. A company with a net profit of 1 billion U.S. dollars is very valuable in the capital market of.
In the capital market, it is possible to achieve a market value of 10 billion or even 100 billion US dollars. However, the source of these market capitalizations lies in the price of Bitcoin. If the price of Bitcoin falls to 1,000 US dollars, then the company Grayscale will be worthless.
Grayscale's profits are settled on the currency basis. Grayscale earns coins.
The management fee settled in the currency standard will make the number of bitcoins corresponding to each GBTC share held by investors will continue to decrease. Therefore, Bitcoin will also be slowly transferred to Grayscale, and in the long run, Grayscale will become one of the largest Bitcoin holders in the market.
In fact, GBTC does not "timing" Bitcoin investment, but aims to track the trend of its price itself and serve its investors. Therefore, its Bitcoin investment investment strategy is "passive", why?
1. The source of demand for increased holdings of BTC is that arbitrage institutions continue to enter the market with large funds. After buying up the share of GBTC, Grayscale increased its holdings. But the ultimate source of demand comes from the secondary market.
Therefore, once Grayscale smashes the market and leaves the market, his stock price in the secondary market will plummet, which is the last thing Grayscale wants to see.
