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Grayscale BTC and ETH funds reaching premium rates amidst market slump; why?

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While the gloomy shades market has been going through in the past several days, it’s quite surprising to see price hikes in financial products

Recently the crypto market in the last few days has witnessed a quite remarkable crash, along with altcoins and other major cryptocurrencies, including bitcoin and ethereum, have suffered huge crashes where coins have not seen the lows like these. At the same time, it’s needless to say that this unexpected fall propagated the shockwaves throughout the market. Grayscale Bitcoin and Ethereum-like trust products’ negative premium has reached a record high, where Grayscale Bitcoin Trust has seen a negative premium of about 30.65%. A similar fate has been seen in market price per share as it fell upto 18.31. 

Ethereum Trust had a negative premium of 33.71%, whereas ETC trust had also seen a negative premium of about 54.55%. Bitcoin funds overall have reduced their holdings of bitcoin upto 1,059 BTC, and ethereum funds have reduced their holdings of 6,395 ETHs. These developments could potentially trigger two possibilities here where one is that investors or traders could buy the coins respective to a discounted price, as Peter Schiff highlighted in his tweet of 13th May that could show some sense of desperation. 

Schiff’s tweet stated that the Grayscale Bitcoin Trust is currently trading at a discount of about 32%; this shows the desperation of GBTC owners that they want to get rid of their exposure to Bitcoin (BTC). However, for those who still want to have bitcoin, there is no reason to buy the crypto assets while you can get approx 47% more bitcoin (BTC) while buying the GBTC instead. 

The demand of the secondary market is sluggish, while seeing the current premium rates on the negative side. There has been a positive premium rate on a very high side that GBTC has maintained, up to 20% or sometimes more in the past for a long time now, which is due to the threshold of high investment, mainly of Grayscale investment products. The nonredeemable features and lock-up mechanism have resulted in buying demand which is strong for the long term in the secondary market, which could further increase the premium rate. 

Even three funds of Morgan Stanely increased their shares of GBTC by an average of about 60% in last year’s third quarter. The primary market price of GBTC’s $35.07 per share, and the bitcoin exposure on investment banks is more than $230 million worth. 

ALSO READ: How To Trade Bitcoin in Dubai in 2022

Nancy J. Allen

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