Cryptocurrency
Grayscale, The World’s Largest Bitcoin And Crypto Asset Manager, Has A Massive ‘Premium’ Problem
As reported on Forbes, “Grayscale, the world’s largest bitcoin and cryptocurrency asset manager, has taken the investment world by storm and helped propel crypto onto Wall Street. “New York-based Grayscale, owned by Barry Silbert’s expanding Digital Currency Group, currently boasts over $5 billion in assets under management—up around 40% since its last quarterly report in June and largely driven […]
As reported on Forbes, “Grayscale, the world’s largest bitcoin and cryptocurrency asset manager, has taken the investment world by storm and helped propel crypto onto Wall Street.
“New York-based Grayscale, owned by Barry Silbert’s expanding Digital Currency Group, currently boasts over $5 billion in assets under management—up around 40% since its last quarterly report in June and largely driven by its flagship bitcoin trust.
“Grayscale publicly launched two new cryptocurrency funds last week, a litecoin trust and a bitcoin cash trust, with demand driving one of the funds to a staggering 1,000% premium—sparking suggestions some investors might be ‘unaware’ they’re paying significantly above the token’s market rates and causing doubt that the cryptocurrency market has much matured since bitcoin’s 2017 boom and bust.
“Both the Grayscale Litecoin Trust and the Grayscale Bitcoin Cash Trust began trading publicly almost two weeks ago and have seen swinging triple-digit premiums since. The litecoin fund was briefly trading at a premium of over 1,200% on the underlying litecoin price, data produced by analysts at Arcane Research showed. It’s now down to a mere 600% premium.
“The funds have collected almost $50 million from accredited investors over the last two years and can now be traded like stocks, allowing over-the-counter investors to gain exposure to the cryptocurrencies without having to deal with clunky bitcoin and crypto exchanges that can appear risky.
“Elsewhere, the Grayscale Bitcoin Trust, which debuted as the Bitcoin Investment Trust in 2013, has this year consistently traded at a premium of around 20% on bitcoin, while the premium for the ethereum fund, created in December 2017 during the height of the crypto bubble, recently fell under 100% for the first time this year—down from over 800% in June.
“‘These trusts are based solely on single assets, and should thus not outperform its underlying asset over time,’ Arcane Research analyst Vetle Lunde wrote. ‘The excess return should be arbitraged away.’
“The funds’ premiums emerge as public investors buy into existing shares of the fund, with the original accredited investors being the sellers…”