Grayscale Bitcoin Trust (GBTC): An Alternative for Bitcoin Exposure?

Grayscale Bitcoin Trust (GBTC) Talking Points:

• GBTC is traded on the OTC market and invests in Bitcoin and other crypto-related assets.
• The company advertises itself as a way to speculate on Bitcoin without purchasing the currency directly.

Another popular Bitcoin-related investment is the Grayscale Bitcoin Trust (GBTC). GBTC is traded on the OTC market and invests in Bitcoin and other crypto-related assets.The company advertises itself as a way to speculate on Bitcoin without purchasing the currency directly. It handles storage, custody, and other costs associated with holding cryptos. The price of GBTC has risen from $11 a share in late 2020 to around $45 a share in April 2021. While retail investors and other market participants use GBTC as a means to get exposure to bitcoin, some argue that the premiums paid to own shares outweigh the liquidity and security benefits that the trust is positioned to offer.

This may also explain the divergence in performance between GBTC and Bitcoin. On the below chart, both are plotted with GBTC represented in blue and Bitcoin represented in orange. This divergence has so far been on full display in 2021 trade. While both markets are currently holding on to net gains, GBTC set a high on February 19th and since hasn’t encroached upon the $56 level. Bitcoin hit what was at the time a fresh high a couple of days later, on February 21st testing above the $58,000 level for the first time ever. Since, Bitcoin has continued to push up to fresh highs while GBTC remains below that February 19th inflection point.

GBTC (blue) v/s BTC (orange)

Chart created by James Stanley, Source: TradingView

Bitcoin, GBTC Divergence

Probably most interesting about the relationship between Bitcoin and GBTC has been the recent divergence. While Bitcoin has continued to run up to fresh highs, GBTC has not. And, by many accounts, the past two months of price action looks very range-bound. GBTC has not been making the same higher-highs that Bitcoin has, and for those that are looking for exposure into cryptocurrencies, this should be a factor of consideration as recent trends have not been great for that correlation.

GBTC Daily Price Chart

Chart created by James Stanley, Source: TradingView

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— written by Izaac Brook, DailyFX Research Intern, James Stanley, Senior Strategist