GBTC Premium is rising - Bitcoin spike Imminent?
The premium on the Bitcoin Investment Trust has been rising the last few days...
And that may mean good things are coming for bitcoin.
For those that aren't familiar, GBTC is the Grayscale Bitcoin Investment Trust.
It holds a stash of bitcoins in a secure location and the ticker symbol goes up and down as the price of bitcoin changes.
As you might imagine, at times it can vary wildly from the underlying price.
Just recently the premium on it has start to spike.
That means the value of GBTC has started to trade above its asset valuation.
Currently the premium on GBTC is trading right around 30%...
That may sound like a big number but it actually traded at close to a 100% premium back in December of 2017.
During the height of the last mania phase.
A few days ago the premium was barely hanging on to the 20% number.
Now, just in the last few days it has climbed up to 30%.
Why does this matter?
It is interesting to note because GBTC is the closest thing to a bitcoin ETF for US based investors.
For that reason there are a lot institutions in it.
They don't mind paying a premium when they don't have to worry about custody of the cryptocurrency and they can buy it with ease from their traditional brokerage accounts.
On top of that, many institutions have rules about buying things on unregulated exchanges, such as a cryptocurrency exchange.
This would be a way around those rules while still having some exposure.
With the premium drifting up like this, one could assume that these institutions are either covering their short positions or increasing their long positions because they are expecting a rally very shortly.
We saw the premium spike just before bitcoin rallied from $4k up to $5,600 several weeks back.
I think we may be about to see something similar happen again now....
Stay informed my friends.