Grayscale Can Delight Investors!
Bitcoin investment vehicle Grayscale completed the lockdown of its shares this week, ending a significant controversy both within and outside the crypto sector. Grayscale has also been a beacon of hope for many altcoins. A post released through Grayscale said exactly 23 different cryptocurrencies were under review to be made available to investors. Although Grayscale hasn’t made a clear statement that it will list almost all of these cryptocurrencies, it may take steps at the end of the review, mainly in line with investor interest.
However, Grayscale is known as a trust, not an ETF!
The ETF passively monitors the value of any digital asset while providing access to that fund. In other words, it doesn’t take any positions and doesn’t actively manage funds. Therefore, it offers cheap service.
Generally, the value of the ETF stock is close to the value of the assets it tracks. An arbitrage opportunity arises when the value of the share diverges from the value of the investment held. For example, suppose the value of the stock is traded at 80 units, while the value of the holdings is 110 units. In such a case, the investor immediately collects the 80 units of the stock from the stock market, returns it to the institution that created the ETF by the predetermined rules, receives 110 units of the asset corresponding to that share in return, as a result, automatically makes a profit of 30 units.
On the other hand, the trust has different rules than the ETF and doesn’t carry much flexibility in the ETF fund. For example, buying, trading, or giving back trust shares depends on specific rules!
How Does Grayscale Work?
Grayscale invests in certain digital assets through trusts, which it takes out as a trust manager. The most famous of these is the fund called GBTC, which invests only in BTC. The money collected can be Dollars or BTC. For this, you need to be an ‘accredited investor.’
GBTC buys BTC with these coins it collects. It also gives its investors an amount of GBTC shares equal to the value of these digital assets it receives. Investors who buy this stock cannot sell it for six months. After this locked period ends, they have the opportunity to sell their shares on the stock exchange. Another interesting issue is that GBTC issues shares but doesn’t buy back shares.
Well, After That, What Will Happen?
First of all, it may be a little challenging to say that GBTC will be traded with high premiums as before. Because in a stock that is constantly traded at a premium, you can maintain the mystical atmosphere it creates and increase the premium amount even more. When the stock is sold at a discount for a certain period, that atmosphere disappears.
On the other hand, some may think that the discounted movement of GBTC may also bring an arbitrage opportunity. However, those who think this way may be waiting for the price to drop further before taking action.
Beyond that, at the point where ETFs based on digital assets are allowed, Grayscale will not have a big joke. Grayscale has already applied for an ETF and will convert its funds to ETFs when the appropriate environment is available.
If there is a tremendous demand for BTC, there is a shortage of BTC in the market due to the limited supply, and there is a perception that the price will increase in the long run, then maybe the interest can return GBTC and make the fund premium. It is helpful to watch GBTC from afar and keep cool until this situation, which seems complicated for now, is realized.