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Bitcoin: With the decline in the gray premium, is it the right time to invest?



The largest Bitcoin fund in Bitcoin – Grayscale’s GBTC is the third consecutive discount transaction, which is the biggest discount to date. It started with a discount of less than -0.25% after Bitcoin fell to $58,330 from the latest ATH. Analysts on cryptocurrency Twitter suggest that the price may fall further before it returns to the $268,000 orbit. According to data from CoinMarketCap, the asset is currently trading at $44,698.

The current trading price of BTC is about 6% lower than the previous day’s price and 20.78% lower than last week’s price. At present, the discount of GBTC is close to 3%, and such a high discount and premium are a buying signal for contrarian investors. In the last two times, GBTC has been discounted, and in the following months there will be 2x and 4x rebounds respectively. It is expected that the same situation may occur this time, but further corrections will be made in the short term.

How Grayscale's discount on GBTC caused prices to fall further

Source: Twitter

The above chart shows the premium or discount of GBTC’s net asset value. The key question here is whether history is likely to repeat itself? Although Canada has launched a new Bitcoin ETF, which provides institutional investors with opportunities to invest in Bitcoin, the premium of GBTC will still have an impact because discounts provide institutions with generous investment opportunities. Another factor to consider is that in the past few weeks, Bitcoin transactions have become crowded and discounted transactions. GBTC stated that the price of Bitcoin will fall further in the near future.

Although there are competitors offering products similar to GBTC, Grayscale’s AUM makes it challenging for competitors. In the past two weeks, multiple Bitcoin ETFs have been launched. Institutions have many opportunities to enter and provide multiple functions such as reducing fees. However, Grayscale’s BTC provides free Bitcoin through discounts.

Canadian trust companies have also seen discounts, but due to the high volatility, it is not an ideal choice for every institution. Institutional investors buy GBTC instead of Bitcoin to hedge against the volatility of Bitcoin in spot or derivatives exchanges. When the price of Bitcoin is higher, GBTC will have a premium, but when the price drops, there will be a discount. At present, even at the level of $46,000, GBTC is still trading at a discount, and as the discount increases, this may cause the price of Bitcoin to fall further.


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