Bitcoin ETF (GBTC): Is 17% premium irrelevant?

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dru808
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by dru808 »

investlikebogle wrote: Wed Feb 10, 2021 2:16 am
supersecretname wrote: Fri Jan 22, 2021 9:38 am
aristotelian wrote: Fri Jan 22, 2021 9:31 am
supersecretname wrote: Fri Jan 22, 2021 9:22 am
aristotelian wrote: Fri Jan 22, 2021 9:18 am Why would you buy the ETF when you can easily buy BTC itself? It's not like gold where you'd have to store it.
You can buy in a tax-advantaged account.
I would not pay 17% annually to do so when you can usually realize gains in taxable account for less than that, or realize losses should it go down. There are also crypto IRA's out there. If I am going to take that kind of risk, no way am I giving Grayscale as 17% guaranteed return.
Grayscale doesn't capture the premium to NAV. They sell the shares to others at par, with a 6 month lockup. The premium fluctuates. In good times it's up, bad times it's down. But you are certainly not guaranteed to lose 17%, e.g. you buy + 17% and sell +17%. Yes, it's more risky than just buying BTC directly, but you can't do that easily in IRAs.
Regarding 6 month lockup that you mentioned, does it mean if I buy gbtc in taxable account, I need to wait 6 months to sell it?
If you’re buying through a brokerage no. The lockup applies to accredited investors that buy at nav privately or turn their bitcoin over to grayscale.
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Jantoven
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by Jantoven »

Going to bump this thread...

GBTC has been trading at a negative premium for a few weeks now, so it does appear that the 17% premium did matter. The question is, how much more of a discount can GBTC be traded at? Will it continue to stay steeply negative?
wmvink
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by wmvink »

Grayscale will do *something* to get it closer to NAV. They've already earmarked $250M to prop up the price and if and when US-based Bitcoin ETFs launch there will be an even bigger incentive to prop it up. The most impactful thing they could do is make the shares redeemable for the underlying BTC assets. I wouldn't be surprised if they're preparing to do that as soon as November 2021, when the SEC may approve the first real BTC ETF.
quicknss
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by quicknss »

they will convert to an etf structure
Jantoven
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by Jantoven »

quicknss wrote: Sat Mar 20, 2021 6:05 pm they will convert to an etf structure
How would that work?
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Samosa22
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by Samosa22 »

Yep, I bought GBTC on January 4, 2021 and paid approximatley 16% premium. As of yesterday market close the return on my initial investment is 51%. I hold it in Roth IRA, So no taxes meaning a net 51% return on my initial investment. OTOH, the value of Bitcoin during the same period increased 81%, but then one would hove to pay taxes on 81% capital gains. My Fed & state combined marginal tax rate is approximately 28%. So, even though I bought GBTC at 16% premium, had I sold GBTC yesterday I would have made roughly the same after-tax profit if I held Bitcoin during the same period.

Having said that, I am looking for reasonable exit price (in terms of premium) and plan to sell GBTC in Roth, buy bitcoin directly on a crypto exchange for the same amount of capital.
Diversification is protection against ignorance - WB.
matt1882
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by matt1882 »

That is what they need to do--which would presumably eliminate the discount/premium. But doesn't the fact that it has been trading at a substantial discount for the past two weeks suggest that the market as a whole is less than certain that this is what GBTC will do in the foreseeable future? Once a Grayscale ETF is approved by the SEC, is there anything legally that would prevent Grayscale from converting GBTC to the new ETF?
Jantoven wrote: Sat Mar 20, 2021 6:19 pm
quicknss wrote: Sat Mar 20, 2021 6:05 pm they will convert to an etf structure
How would that work?
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ShaftoesSpreadsheet
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by ShaftoesSpreadsheet »

GBTC is currently trading at a 12% discount. Even after the recent correction.

https://ycharts.com/companies/GBTC/disc ... ium_to_nav

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txhill
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Re: Bitcoin ETF (GBTC): Is 17% premium irrelevant?

Post by txhill »

I didn't realize there was a separate post on GBTC! Just posting here, but isn't the discount just representing future discounting due to their high expense ratio over time? I think the discount assumes they will not be able to convert to an ETF (and reduce fees) any time soon. Definitely let me know if I'm wrong on that. I don't personally hold any GBTC.
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