​Re-understanding the expectations of the crypto market for Bitcoin ETFs from the reappearance of a negative premium of over 20% in GBTC

History will not repeat itself, but it will always be surprisingly similar. This old-fashioned saying seems to be particularly suitable in the crypto market. Looking at the development of the crypto market for more than ten years, we can find that many major events affecting the development of the industry occurred in the second half of the year. The fourth quarter is more concentrated. For example, at the end of October 2008, the Bitcoin white paper was released; on November 28, 2013, the price of Bitcoin exceeded $1,000 for the first time; on November 28, 2017, the transaction price of Bitcoin exceeded $10,000 for the first time; December 18 of the same year, Chicago The Commodity Exchange (CME) officially issued Bitcoin futures contracts, and the Chicago Board Options Exchange (CBOE) also preemptively launched Bitcoin futures a week ago. Intentionally or unintentionally, due to coincidence or unintentional, the fourth quarter on the crypto market does not seem to be doomed to be flat.

Now coming to the fourth quarter of 2021 again, we can see that there is also a sudden change in the encryption market. In today’s article, we will review and review with the representative of the major institutional investors driving this round of bull market-the crypto asset management company Grayscale Investments and the current Bitcoin (futures) ETF as the main line. Examine the major events that deserve attention since the fourth quarter, and follow these clues, what valuable information can be interpreted.

After five months, BTC reproduced a negative premium of more than 20%

As the single-asset trust fund with the largest market value of Grayscale Investment, GBTC ranks first with a total value of US$38.683 billion (approximately 75% of the total value of all digital asset trust funds under Grayscale), and it has also become an analysis in the crypto market. The focus of the teachers, after all, in terms of the status and size of GBTC, in the current crypto market, it still has a considerable vane-like significance.

On Tuesday, October 12th, Hong Kong time, according to the statistics of OKLink chain masters, the premium rate of GBTC in the secondary market dropped to -20.06% again, and the premium rate of GBTC last time touched -20% is still up During the half-year period from May 12th to 15th, the lowest fell to -21.23%.

​Re-understanding the expectations of the crypto market for Bitcoin ETFs from the reappearance of a negative premium of over 20% in GBTC

GBTC’s premium rate trend in the secondary market, data source OKLink chain master

Generally speaking, when the premium rate of GBTC in the secondary market is negative, it means that the market price of GBTC is already lower than its unit net assets. In layman’s terms, the cost of purchasing and holding GBTC from the primary market at this time It is higher than buying directly from the secondary market. A rough analysis shows that the root cause of this situation can be traced back to the decline in the attractiveness of GBTC to investors in the secondary market, which eventually led to an oversupply.

However, if you look at the details and compare the overall environment of the crypto market at that time, you can find that the reasons why the GBTC premium rate fell below -20% are very different. The GBTC in mid-May showed a large negative premium, mainly because the crypto market represented by Bitcoin fell sharply in a short period of time, which led to the spread of panic among market investors and serious selling behavior. Under strong selling pressure, The price of GBTC in the secondary market has continued to fall, and the negative premium rate has increased; and last week’s GBTC had a negative premium of more than 20%. From the perspective of futurecomers, the reason is largely due to market investors’ exposure to Bitcoin ( Futures) ETF is about to be approved to go online due to the potential positive stimulus. Therefore, from the perspective of duration, the negative premium rate in mid-May lasted longer, and the degree of negative premium was also greater.

Bitcoin futures ETF is approved, Grayscale will apply to convert GBTC into Bitcoin spot ETF

Just after the GBTC premium rate hit -20.06% on October 12, in just a few days, there were news that the Bitcoin futures ETF was approved and Gray’s application to convert GBTC into a Bitcoin spot ETF. The above also confirms our conjecture above. On October 15, after a meeting of the U.S. Securities and Exchange Commission (SEC), it was announced that it had approved the Bitcoin futures ETF issued by the fund management company ProShares. NYSE Arca exchange trades, and its management fee is only 0.95%, which is much lower than the current GBTC 2% management fee. However, it should be pointed out that this trading product will use Bitcoin futures contracts instead of Bitcoin spot as the underlying asset, which is still very different from the Bitcoin ETF that we have been following for a long time.

Also on October 15, according to overseas media citing sources familiar with the matter, Grayscale Investment plans to apply for the conversion of GBTC into a spot exchange-traded fund (ETF) in the near future. In fact, as early as the beginning of April this year, the market had already reported that Grayscale would apply to the SEC to convert GBTC to Bitcoin ETF, but the head of Grayscale Investment said at that time that “the time of conversion depends on the regulatory environment.” . From this point of view, perhaps Grayscale believes that the regulatory environment at this time has reached the “right time”, then it can be guessed that in the months from April to the present, Grayscale is likely to convert GBTC to Bitcoin. ETF prepares for various aspects, such as the formulation of trading rules, communication with the SEC and investors, etc. However, even after Grayscale officially submits the conversion application, in accordance with the SEC rules, it will still face a review period of up to 240 days, which is the same as the Bitcoin ETF application submitted by VanEck, WisdomTree, Kryptoin, Valkyrie and other institutions currently under review. As for whether it can be approved smoothly, it still takes time to give an answer. From a slightly subjective point of view, the news of the approval of the Bitcoin futures ETF has stimulated the market’s optimism to a certain extent. At present, more investors are more inclined to believe that the SEC will finally approve the listing and trading of Bitcoin spot ETFs. One point that needs special reminder is that within half a month after the Chicago Board Options Exchange and Chicago Mercantile Exchange launched Bitcoin futures in December 2017, the price of Bitcoin quickly reached the peak of the previous bull market, and then Decline quickly. As we mentioned at the beginning-history will not repeat itself, but it will always be surprisingly similar. Once the Bitcoin spot ETF is approved for listing, the majority of investors need to take risk control measures.

Gray’s self-help, and the crypto market’s expectations for Bitcoin ETFs

In the previous introduction to Grayscale GBTC, we have introduced that Grayscale GBTC is a trust fund product similar to an ETF, which can be purchased in the primary market and traded in the secondary market at the same time. There are two prices generated by this mechanism: real-time net value and real-time market price. The gray-scale GBTC is an investor who has been audited to purchase GBTC shares in cash or bitcoin, and can only be sold in the secondary market after six months of lock-up.

At the beginning of the negative premium of Grayscale, some people in the market thought that this situation would also appear in ETFs. Everyone is still a passenger on the same boat, so there is no need to worry too much. But in fact, Grayscale Trust is completely different from traditional ETFs. ETFs in the traditional financial market usually purchase shares on the first day and can be sold on the same day or the next day. Therefore, when the net value is greater than the market price, investors buy ETFs in the secondary market and follow the rules at any time thereafter. The net value price is redeemed to take advantage of arbitrage.

When the market price is greater than the net value, investors will subscribe first and then arbitrage in the secondary market. The lock-up date of GBTC is as long as six months, which means that if the price of Bitcoin plummets after buying, investors cannot sell, and can only watch the loss of assets.

Therefore, from here we can further understand why GBTC has generated a negative premium for 7 months since March and why Grayscale is eager to convert GBTC to Bitcoin ETF, and we can better understand investors in the crypto market. Looking forward to the mood of Bitcoin spot ETF listing. In summary, the main points are as follows:

1. ETF allows market makers to create and redeem stocks at will, GBTC does not allow redemption, and the realization of fund shares must be traded through the secondary market.

2. GBTC has a 6-month lock-up period, and there is usually a high premium. ETFs have better liquidity, and there is usually no premium or discount.

3. GBTC transaction costs are high, involving brokerage fees, annual management fees, and premiums. Bitcoin ETF fees are lower. For example, the BITO mentioned above has a management fee of only 0.95%, while the first Bitcoin ETF listed in Canada, BTCC, has a lower management fee, as low as 0.75%.

4. GBTC has a high investment threshold, starting at USD 50,000, and it is only open to qualified investors. Bitcoin ETFs have fewer restrictions on the qualifications of investors and the amount of investment.

Based on a series of recent trends in the crypto market, it is not difficult to find that after more than ten years of brutal growth, the crypto market represented by Bitcoin has attracted the general attention of the traditional financial market and is gradually moving towards standardization and compliance. change.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/%e2%80%8bre-understanding-the-expectations-of-the-crypto-market-for-bitcoin-etfs-from-the-reappearance-of-a-negative-premium-of-over-20-in-gbtc-2/
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