It\u2019s hard to find an asset that has outperformed BTC this year, but Grayscale\u2019s Bitcoin Trust (GTBC) has accomplished that handily.<\/p>\n
GBTC, a security which represents an underlying cache of Bitcoin, hit a year-to-date high of $26.89 on Nov. 1, more than triple its price of $8.20 on Jan. 1. The rally dwarfs Bitcoin’s own resurgence in 2023, where the world\u2019s most valuable digital asset outpaced the S&P 500 by over 100% this year on its way to hitting $35,381.<\/p>\n
GBTC is a major component of the overall crypto market \u2014 it has $21.4B in assets under management, according to its issuer, Grayscale<\/a>.<\/p>\n The reason for the price discrepancy between GBTC, which is backed by Bitcoin, and the cryptocurrency itself, lies in the product\u2019s structure \u2014 GBTC is a closed-ended fund, meaning that its shares cannot be quickly redeemed for the underlying Bitcoin.<\/p>\n <\/a><\/p>\n Because of this, GBTC generally trades at a premium or discount relative to the net asset value (NAV) of the underlying bitcoin. After trading at a premium as the bull market of 2021 kicked off, GBTC\u2019s discount to NAV peaked in late December 2022 at nearly 50%.<\/p>\n Since then, the discount has shrunk to less than 14%, the narrowest in nearly two years.<\/p>\n <\/p>\n <\/a><\/p>\n Pelli Wang<\/a>, the co-founder of Bracket Labs, a trading system which offers range-bound products, offered a possible explanation for GBTC\u2019s discount shrinking \u2014 investors may be piling in ahead of a potential conversion of GBTC from its closed-end model to a straightforward exchange-traded fund (ETF).<\/p>\n Such a conversion would mean that GBTC shares could be easily redeemed for Bitcoin, essentially erasing any discount, allowing investors to profit as GBTC came back to par with its underlying NAV.<\/p>\n In particular, Wang thinks BlackRock\u2019s application for a spot Bitcoin ETF is convincing investors to bet that GBTC will also soon convert to an ETF. \u201cIt would look really bad if the SEC only granted BlackRock the ETF,\u201d Wang said, suggesting that the SEC may clear a handful of other players to also launch spot BTC ETFs.<\/p>\n Start for free<\/a><\/div>\n There are additional signs that a GBTC conversion is possible \u2014 last month, the SEC declined<\/a> to appeal an August ruling that found<\/a> the regulator\u2019s denial of Grayscale\u2019s application to convert GBTC to an ETF unsatisfactory.<\/p>\n The SEC has also scheduled a closed meeting<\/a> on Nov. 2, which some pro-Bitcoin media outlets are speculating may involve a discussion of Blackrock, Grayscale, and others\u2019 applications.<\/p>\n A conversion would put an end to a long saga of GBTC trading at both a premium and discount relative to BTC.<\/p>\n When GBTC traded at a premium \u2014 for most of its existence until February 2021 \u2014 there were far fewer options to get exposure to Bitcoin.<\/p>\n \u201cWhat happened was people started to get smarter about actually just owning Bitcoin outright,\u201d Wang said.<\/p>\n Microstrategy, the publicly traded analytics company that has amassed roughly $4.68B<\/a> of BTC, is one example of a prominent investor that skipped the GBTC route \u2014 the company has chosen platforms<\/a> like Coinbase to buy the digital asset directly.<\/p>\n![\"GBTC](\"https:\/\/thedefiant.io\/_next\/image?url=https%3A%2F%2Fcdn.sanity.io%2Fimages%2F6oftkxoa%2Fproduction%2Ffb658ecd71932c952a666ec7976b9a4d248aa978-804x253.jpg&w=828&q=75\")
Potential ETF Conversion<\/h2>\n
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From Premium To Discount<\/h2>\n