By Shelly Melancon (Switzerland)
Since the grayscale bitcoin premium became negative in late February, there have been zero inflow into it. The grayscale bitcoin trust (GBTC) has been in great demand because it is the closest to a regulated bitcoin investment product. This huge demand caused it to be a product premium and made it more expensive than its actual value. However, there have been better alternatives in recent times. Thus, there has been a decline in the demand for GBTC, and the zero inflow might be proof. Nevertheless, as many wall street colossus and bitcoin critics joined the crypto train, it has been one hell of a bullish season for the leading cryptocurrency.
Yet, GBTC remains the most preferred option among us financial institutions because there are no better bitcoin investment alternatives. However, with the recent introduction of bitcoin investment products by other leading financial institutions such as S&P 500, Goldman Sachs, and JP Morgan, there has been a gradual decline in the demand for GBTC. Hence, the GBTC now trades at a discount compared to BTC’s current price. Between January and mid-February of this year, there was an inflow of over 50,000 BTC into the Grayscale Bitcoin Trust. As a result, GBTC traded at an average of 15% between that period – a sign of big interest from institutional investors. But by the second half of February, it fell below 10% to trade at a discount compared to the BTC/USD rate.
Is The American Authorities’ New Crypto Regulations Proposal The Reason For The Decline In Institutional Demand For GBTC?
Grayscale bitcoin uses the fractionalized shares method, which is quite popular among investment firms, especially when there are no regulations for a particular asset class. It buys bitcoin and allows investors to buy in fractionalized portions based on the amount of bitcoin in its armory. But lots of analysts believe that it’s only a matter of time before the relevant government agencies sanction these bitcoin investment products. Perhaps that was why grayscale revealed that it would soon convert its bitcoin trust to a bitcoin exchange-traded fund (ETF). Out of the seven known companies that filed for a bitcoin ETF offering with the US securities and exchange commission (SEC), VanEck’s proposal has been postponed. While the SEC is yet to take decisive action on approving bitcoin ETFs, Canada has approved several bitcoin ETFs and is already enjoying the fruits of their action.
Buying The Bitcoin Price Dip
The grayscale premium started recovering after the BTC crash last month, which indicates that institutional investors haven’t abandoned the GBTC completely. It is also proof that these traditional investors still desire to invest in the crypto market.
Glassnode analytics revealed that the Canadian purpose bitcoin ETF had a similar experience to the GBTC between late April and early May. The analytics firm also noted that most sellers in the current bitcoin price decline are short-term investors and most long-term holders still bought the dip with a strong belief in a complete BTC price recovery.
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