Grayscale's ETF Fee Lag Leads to Lowest GBTC Discount in 18 Months

• Grayscale Bitcoin Trust Discount Hits Lowest Level Since April 2021
• GBTC Trading at a Discount Since February 2021
• Discounts and Premiums in GBTC Trading Strategy
• Bitcoin Exposure for U.S. Stock Traders
• Grayscale Awaits SEC Decision
• Most Expensive Offering for Investors if Approved

Grayscale Bitcoin Trust Discount Hits Lowest Level Since April 2021

The Grayscale Bitcoin$42,260 -0.64% Trust (GBTC), recognized as the world's largest bitcoin (BTC) fund, has experienced its lowest discount since April 2021. This decrease is happening in anticipation of the trust's conversion to a spot bitcoin exchange-traded fund (ETF). As data reveals, the discount dropped to an all-time low of 5.6% on Monday-a level last observed in June 2021.

GBTC Trading at a Discount Since February 2021

The GBTC fund has been trading at a discount since February 2021, peaking at around 50% in December 2022. However, the anticipation of an ETF approval coupled with a rising sentiment for bitcoin has caused the discount to slowly but steadily narrow. The fund concluded Monday with a price tag of $39 per GBTC share, which was equivalent to $41.86 in Bitcoin value as of Tuesday.

Discounts and Premiums in GBTC Trading Strategy

The GBTC trust does not possess any inherent market mechanism to maintain the GBTC share price close to the underlying value of bitcoin. This leads to the formation of discounts and premiums, both of which can be exploited by traders as part of their trading strategy.

Bitcoin Exposure for U.S. Stock Traders

As of Tuesday, GBTC offers one of the only ways for stock traders in the U.S. to gain exposure to the price fluctuations of bitcoin without having to buy the cryptocurrency itself. The presence of a discount could potentially be perceived as a bearish indicator as it could indicate a decrease in interest for Bitcoin among traders, while a premium could infer an increased demand for Bitcoin.

Grayscale Awaits SEC Decision

Presently, Grayscale is awaiting a verdict from the U.S. Securities and Exchange Commission (SEC) on whether to approve the trust's uplisting as an ETF. This decision also impacts 12 other potential entrants. As part of its proposed transformation to a spot bitcoin ETF, Grayscale has decreased its management fee from 2% to 1.5%, as stated in an updated S3 filing from Monday. Currently, the trust manages assets worth over $27 billion.

Most Expensive Offering for Investors if Approved

If the SEC approves the conversion, it will become the costliest option for investors. Prospective issuers like BlackRock plan to offer their bitcoin ETF at 0.20%, which may rise to 0.30%. In contrast, Bitwise, a crypto-native fund manager, intends to charge the lowest fees-0.24% after a six-month period devoid of fees.

Edited by Jonathan Stoker