GBTC announces plans to convert to an ETF which should help close the -9% NAV premium gap
The largest U.S. exchange traded products, GBTC and ETHE, for the largest two crypto assets, Bitcoin and Ethereum, have been trading at a persistent discount to their NAV for a little over a month, with GBTC sitting around -9% and ETHE sitting around -5%.
Source: Bloomberg (Date: 4/5/2021)
Much of the discount has been the result of investors expecting a U.S. listed Bitcoin ETF in the near future after the approval of several in Canada and the several recent ETF applications in the U.S.
Source: CNBC
This morning, Grayscale Investments, the parent company of the products announced (Grayscale’s Intentions for a Bitcoin ETF) that it planned to convert its GBTC product into an ETF when possible.
Source: Medium
We think this is a very positive move for Grayscale to maintain its position as a leader as the largest listed Bitcoin product and this announcement should help close the negative premium gap.
Grayscale has been giving the market hints towards this decision for the last month. We wrote on 3/10 how we thought the discount could be temporary after Grayscale announced plans to purchase up to $250M of GBTC shares.
Source: Businesswire
The announcement does not guarantee that the price of GBTC will converge with its NAV, as it will still be set by supply and demand until the fund is one day (if ever) converted to an ETF. But we think the timing of the announcement will be very positive for price of GBTC to instill market confidence ahead of the unlocking of a large nearly $5B worth of shares in the coming months.
Source: Bloomberg, TheSkyhopper
We think ETHE could see its -5% discount improve as well on the news which could also benefit the ETH price.
We think this announcement could have the following implications:
1. Relieve selling pressure on GBTC shares
2. Relieve BTC spot selling pressure from investors playing the arb trade the other way
3. It may reenergize demand for BTC from investors willing to contribute to the GBTC trust again
4. We think ETHE could see its -5% discount improve as well on the news
We view all of these as very very bullish.
Source: Bloomberg, Fundstrat
Bottom line: The announcement is positive for GBTC and ETHE, Bitcoin and Ethereum, as well as crypto flows in general – we remain bullish on the asset class over the balance of the year.