With Bitcoin Recovering Over $45,000, Grayscale Fund Discounting Increases
Bloomberg Intelligence analyst James Seifart pointed out In his Twitter account, Grayscale Bitcoin Fund (GBTC) yielded a difference compared to its underlying asset, Bitcoin. Seyffart stated that buying GBTC shares in order to open a leveraged bet on or against Bitcoin now makes less sense than before.
Historically, the Grayscale Bitcoin Fund has been showing more returns in both directions, whether Bitcoin is going down or up. At one point, the difference reached more than 180% compared to Bitcoin’s performance. Because of the current opponent, the contradiction between the two origins has turned into a correlation.
While investors could have counted on higher returns in periods of growth on GBTC, they should also have been prepared for further losses. In the February-March period of 2020, Bitcoin experienced an 18% loss while GBTC returned with an even larger loss of 42%. In the last period from May to September, the average difference between the funds and the performance of Bitcoin was around 1%.
Compared to other Bitcoin funds, GBTC remains the most dominant in terms of trading volume of $403 million with its nearest competitor – BTCE – which currently has a volume of around $35 million.
The surge in GBTC discounting has lowered the short interest rate, which is now 0.3%. Low short interest means that traders or investors are not short selling the asset and mostly stay for a long time. In late 2019, the average overdraft rate was 9.5%.
At press time, GBTC is trading at $33.85 with a 40% loss on ATH, while Bitcoin is averaging 30%, trading at $47,300 after recovering 7.8% from daily growth.