Demand for the Grayscale Bitcoin Trust (GBTC) continues to grow, with its relationship topping 30% on December 3. This indicates that Bitcoin (BTC) is seeing an increase in institutional demand as the price consolidates above $ 19,000.
The Grayscale Bitcoin Trust is an institutional medium that can be traded in the US via OTC markets. Certified Investors and Institutions typically use the trust to access BTC through their brokerage accounts.
Why does greyscale increase the Bitcoin Trust premium?
The Grayscale Bitcoin Trust is an institutional arrangement in the US for BTC due to the absence of a registered Bitcoin Fund (ETF).
Other markets like Canada have a Bitcoin ETF that investors can use to access BTC. Without ETFs, US institutions are looking to alternative funds like the Grayscale Bitcoin Trust to invest in BTC.
Each share of the trust is 0.00095346 BTC. Thus, buying a stake in the Grayscale Bitcoin Trust is analogous to buying 0.095% Bitcoin.
On December 3, GBTC traded in the retail and spot markets at $ 23.39, and Bitcoin at around $ 19,250, giving 0.095% of 1 BTC of around $ 17.33. This means that GBTC is about 35% more expensive than buying bitcoins at the current market price.
On December 3, Bitcoin’s price jumped from $ 19,000 to $ 19,250 after the US market closed. Subtracting this difference, GBTC’s current premium is between 25% and 30%. In particular, this is the highest level since June, when the market price for BTC was around $ 9,600 before surging higher.
However, the grayscale itself does not require additional costs. Market prices are at the margin of profit when trading in the US open market. As premiums go up, it means that more and more organizations and accredited investors are accumulating BTC through GBTC.
Although the current premium is increasing, it is still relatively low compared to 2017. This indicates that Bitcoin’s rally still has more room to run. When GBTC premium increases, it usually means an uptrend and a general increase in investor appetite for BTC.
Consequently, the number of Bitcoins owned by Grayscale has increased significantly in recent months. According to the latest report, Grayscale currently has $ 10.19 billion in BTC. Moreover, Grayscale bought twice the amount of Bitcoin mined in November.
Organizations launch BTC Rally
Aside from the continuous rise in demand for gray scale bitcoins, Travis Kling, fund manager at Ikigai, found similarities between bitcoin price increases the previous day and entry into new institutions.
Kling cited a chart indicating that major institutions such as JPMorgan Chase, Citibank, Blackrock and Guggenheim have all responded positively to BTC, which appears to have been accompanied by significant BTC price appreciation potential. On December 1, he said:
I call this graph the classic attack. We’ve been talking about The Herd for more than three years. The herd requires business risk insurance. that’s it. They are by definition not accepted early on, but their pockets are deep and their capital is stable. #Bitcoin is just getting started. ”
In contrast to previous bulls, organizations are now more involved in Bitcoin’s current rally. A clash between institutions that have accumulated BTC and whale sales may exacerbate extreme market volatility.
In recent days, Bitcoin has recorded sharp price fluctuations within hours of being rejected by $ 20,000. It also caused analysts to differ in opinions about the direction of BTC, as Cointelegraph previously reported.
Meanwhile, several indications are that Bitcoin may be on the verge of hacking into $ 20,000 sooner than later.