Grayscale (GBTC) Sinks To New Lows, Is Its Market Dominance Coming To An End?

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Grayscale (GBTC) Sinks To New Lows, Is Its Market Dominance Coming To An End?

Grayscale Bitcoin Trust (GBTC) has plummeted even further and has hit a new all-time low of just over -14% to its relative value.

Historically, GBTC has traded at an average premium of over 15% relative to the underlying Bitcoin held in the trust, but in the last 6 weeks the premium has continued to slip into negative territory.

There are debates as to why Grayscale’s GBTC has continued to fall such as cheaper more liquid Bitcoin ETFs in Canada.

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And with newer trading products sprouting up all the time, is it the last we will see of GBTC at a premium?

Grayscale Has Dominated The Bitcoin Product Market For Years

Grayscale has been around since 2015 and enjoyed the first few years with relatively no competition, but now as more products are being launched is it time for Grayscale to revise its product?

During the late 2020 rally that saw Bitcoin price smash its 2017 all-time high, GBTC was trading at over 30% premium as investors sought ways to gain exposure to Bitcoin.

But with recent corrections and no bullish momentum, the demand for Bitcoin has affected GBTC more than any other Bitcoin traded product.

Since launching in 2015, Grayscale (GBTC) has led the way for Bitcoin traded products and currently has over $34 billion AUM, so it’s a bit early to suggest it is going through a demise.

Grayscale’s New Competitors

Only recently, Wall Street legend Bill Miller was looking to ‘indirectly’ gain exposure to Bitcoin with his flagship hedge fund, the Miller Opportunity Trust through GBTC.

However, GBTC has fallen consistently since early February, and it all coincides with the launch of other Bitcoin traded products that offer competition to Grayscale’s once hegemonic placing.

For many years there were no serious competitors to Grayscale, but with the likes of Fidelity launching a Bitcoin Trust last year, and others following suit there are more trusts that offer exposure to Bitcoin now.

These trusts are expensive and illiquid compared to Bitcoin ETFs and Canada recently launched three, around the time of the start of Grayscale’s demise.

The Purpose Bitcoin ETF launched in February on the Toronto Stock Exchange and has been such a success, it’s hard to believe money gone into that wouldn’t have gone into GBTC if the ETF hadn’t been around.

Since launching in mid-February, the Purpose ETF has broken many records and currently worth $968 million. Not bad considering the Bitcoin price has been somewhat corrective since then.

US-based Trusts And “Proxy ETFs” A Strong Competition

US-based fintech firm BlockFi has launched its own BlockFi Bitcoin Trust, which is a direct competitor to GBTC. And with it being US-based it could be extracting value away from Grayscale.

Let’s not forget, MicroStrategy is what many are a calling a “proxy Bitcoin ETF”. It’s a bit unfair on the business, but MicroStrategy is so heavily invested in Bitcoin anyone buying MSTR is likely doing so to gain exposure to Bitcoin.

America’s biggest banks have also begun offering Bitcoin traded products. Both Goldman Sachs and Morgan Stanley started offering Bitcoin futures products earlier this year, and institutional grade investors will be attracted to their incumbent friends rather than a young fintech startup.

And yesterday, Bitcoin Versed reported on financial giant Fidelity filing for its own ETF, which along with other US-based ETF filings will absorb much more value than its Canadian counterparts.

Is It The End Of The Road?

All of these products have lower fees and are much more liquid than Grayscale Bitcoin Trust, so with more Bitcoin ETFs possible, is it the end of the road for GBTC?

GBTC has gone through dips before and bounced back, but that was in a completely different era for Bitcoin related products. It has some serious competition now, so it has to remain competitive if its to keep growing.

Evolving into a Bitcoin ETF will maintain its competitiveness, so that must be something the Grayscale team are considering.

Or they could change the dynamics of their trust to keep it attractive to investors. Either way, the time of its dominance as the goto Bitcoin traded product is probably over.


Please be advised that the contents of these posts are not to be construed as investment advice. While some of our contributors may be price analysts, their opinions and analyses are personal views and are shared with the intention of promoting discourse and understanding.

Always conduct your own research and consult with a professional financial advisor before making any investment decisions. The Bitcoin market can be volatile, and past performance is not indicative of future results. Invest at your own risk.

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