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🛒 Crypto at a 31% discount 👀

🛒 Crypto at a 31% discount 👀

PLUS: SEC approves first leveraged bitcoin ETF

Alex M.
June 26, 2023

GM everyone. This is 2036, the crypto newsletter that pays you.

Here’s what we’re serving up today 🍲: there is a controversial way to buy crypto at a huge discount to its actual price. It gets some people angry and others excited. We’ll let you be the judge.

Let’s dig in.

🥔 Today’s meat and potatoes

Get smarter on crypto in 2 minutes

A few years ago, if you wanted to buy crypto in your brokerage account, you only had a handful of choices.

One of the most popular was the Grayscale Bitcoin Trust (GBTC).

GBTC is a $20 billion US investment fund that owns and stores bitcoin for you. You can buy shares freely with your brokerage account.

And although that sounds like a regular ETF, it’s not.

Because GBTC shares are not redeemable for bitcoin, they can trade at a premium or discount to the value of its underlying bitcoin.

(ETFs, on the other hand, can create shares to accommodate demand and supply and don’t have premiums/discounts).

For many years, GBTC traded at a premium of 10-30%. And the goal of the fund was always to convert into an ETF as soon as regulations would allow it.

This would instantly eliminate the premium (or discount) on the fund.

But exactly 1 year ago, the SEC refused GBTC’s request to convert into an ETF.

Investors were unhappy, and GBTC started trading at a DISCOUNT to the value of its holdings.

In January of this year, GBTC was trading at a 49% discount to the value of its holdings.

Holders got decimated, but new buyers could buy bitcoin for just $9,900 instead of its market price of $16,500.

Earlier this year here’s what we wrote about it:

If the discounts become premiums - or get eliminated alltogether with an ETF conversion - investors stand to make a lot of money.

And with the market up and Gary Gensler in Congress, we think the wind is blowing ever so gently in GBTC’s favor.

It turns out we may have been right.

10 days ago, Blackrock filed for a bitcoin ETF. As we explained last week, they’re likely to get it approved.

And if the SEC approves the Blackrock ETF, they’ll likely also approve the conversion of GBTC to an ETF as well.

This means the discount will close.

The market is paying attention. In the last 7 days:

The trading volume on GBTC is up over 400%
the discount has narrowed to just 31%

… in other words, bitcoin investors had a good month (up 14%), and GBTC investors had a GREAT month, up 39%.

returns year-to-date

In hindsight, buying GBTC at a discount will either look like a) an obvious no-brainer move if the ETF gets approved or b) bad gamble if it doesn’t.

Cathie Wood - the most badass woman in finance - is a fan. She’s: