Crypto Trust: GBTC Eclipses Nvidia’s Gains with 220% Surge in 2023

ByGavin Cole

Oct 26, 2023

Grayscale’s Bitcoin Trust (GBTC) has emerged as the shining star of the year, delivering a staggering 220% gain and solidifying its position as a lucrative investment. Early-bird investors who took the risk during January’s crypto market slump are now reaping significant rewards.

As per data from TradingView, GBTC’s shares have skyrocketed to $26.79. In contrast, Nvidia, the S&P 500’s top performer, has witnessed a 198% uptick, while the index itself posted a modest 9% growth. Notably, Bitcoin’s value has surged to $35,000, doubling its worth this year. This bullish trend starkly contrasts with the plummeting values of conventional assets like government bonds.

Optimism Surrounding Grayscale’s ETF Ambitions Fuels GBTC’s Rally

Hopes are high within the investment community as many anticipate the U.S. Securities and Exchange Commission (SEC) to authorize the transformation of the Grayscale Bitcoin Trust into a bona fide, open-ended exchange-traded fund (ETF) centered around Bitcoin investments.

This rising confidence has significantly impacted the valuation of GBTC shares. Notably, the disparity between the shares’ price and the trust’s net-asset value (NAV) has been shrinking. It has tapered from a stark 46% earlier this year to a more modest 13% now. 

This phenomenon has spurred traders to procure GBTC shares, often safeguarding against potential downturns by concurrently unloading Bitcoin on the spot or futures market. Once the conversion garners official approval, market mavens predict a swift alignment of the share price with the NAV.

Strategic Play on GBTC Spurs Bitcoin Activity

“GBTC is the gift that keeps giving. Hats off to the astute players—many from our circle—who leveraged the reduction in spread between futures and GBTC to their advantage,” remarked Ilan Solot, the co-head of digital assets at Marex Solutions, in a recent email communication.

Investors have keenly employed a dual-pronged strategy, simultaneously acquiring GBTC shares while offloading BTC futures. This approach is anchored in exploiting the diminishing discount between the two assets.

Earlier in the year, such strategic moves may have inadvertently curtailed Bitcoin’s potential rise. However, as the discount continues to reduce, spurred further by heightened expectations of the SEC greenlighting GBTC’s ETF conversion, traders may consider retracting this strategy. Such a shift, especially abandoning the BTC futures’ short positions, could intensify bullish tendencies for the cryptocurrency.

Growing Optimism Around Bitcoin Spot-ETFs Fuels Market Movements

Alexander S. Blume, managing partner at Two Prime Digital Assets, shared insights with CoinDesk, stating, “With the anticipation of the GBTC ETF conversion approval, the market is gearing up for the price to align with NAV. This adjustment is likely to ease off the short BTC pressure, giving a boost to BTC’s spot price.”

The Bitcoin market has recently experienced a robust uptrend, marking a 28% surge in less than a fortnight and reaching notable 17-month peaks beyond the $35,000 mark. A significant driver behind this bullish run has been the swirling rumors of potential spot-ETFs, notably the speculated listing of BlackRock’s spot bitcoin ETF ticker, IBTC, on the DTCC platform.

The crypto community is abuzz with expectations of the SEC greenlighting multiple spot-based ETFs in the upcoming year. While many anticipate this move to catapult Bitcoin’s price to soar past the $50,000 milestone, the financialization associated with ETFs could also introduce added selling pressures in the market.

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