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GBTC on Discount? Grayscale Bitcoin Trust Reviewed (FOR BEGINNERS) - YouTube
Channel: UpDive
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you can buy bitcoin at a discount with
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gbtc
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wouldn't you like that in this video
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i'll give you all you need to know about
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the bitcoin trust some facts that not
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many people know but i'm interested to
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know is
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10 a discount good enough for you to buy
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bitcoin type 1 in the comments below if
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10 is good enough for you to buy or type
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2 if you don't want to be anywhere near
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gbtc or bitcoin and stick to the end of
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the video for my predictions on what
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would happen to gbtc especially if the
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sec doesn't really want to play ball
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with them
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[Music]
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so gptc on the surface it's really very
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simple it's just a trust
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a special kind of corporate entity
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formed to do just one thing
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to buy and hold bitcoin and that's the
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only thing they do they just collect
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money for people like us
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to buy bitcoins and they're getting 500
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million dollars in fees a year doing
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nothing but holding bitcoin what because
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they receive two percent in fees for
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assets managed now they are holding
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26 billion dollars worth of bitcoin and
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2
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is a crazy fee in finance such easy
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money and while i was looking at this
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website says etf hero but obviously it's
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really wrong because grayscale is not an
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etf but i do understand what they mean
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so let's just forgive them i also
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learned what's scrolling through this
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website that bulgaria and ukraine
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each hold a few billion dollars of
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bitcoins in their treasuries
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interesting going back to gbtc you can
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see that they are way bigger in size
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compared to the next few players
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combined so let's take a quick step back
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and look at why it's such a huge
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dominant force in bitcoin ever since
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2015
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when gbtc was allowed to become openly
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tradable retail investors like you and i
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are able to trade gptc grayscale's trust
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this trust has really been in a sweet
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spot as the only option for investors
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looking for easy access to bitcoin
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without all that
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troublesome storage and custodian type
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of thing but the funny thing is
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why is it such a sweet spot you can see
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that gptc trades as an otc and otc means
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over the counter which means it's not a
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listed stock or
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fund so liquidity and tradable volume is
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supposed to be
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very low but it has an average volume of
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10 million a day
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which is a lot institutions really
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needed gptc because
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many didn't have investment mandates or
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permissions to invest
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or hold bitcoin but they could hold
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securities and gbtc
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was a security and investors didn't need
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to deal with the security of custodian
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issues if they bought bitcoin themselves
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and tax laws was also quite clear with
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gptc and the tradable price of this
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bitcoin trust is supposed to reflect
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what it's actually holding you know
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which is just bitcoins and because it
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had this sweet spot in the market like a
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tradable substitute for bitcoin for many
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investors but ever since 2019
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it usually traded at a premium price
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between six to 40 percent
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over the past two years but that really
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really changed this year
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and i'm gonna talk about that later on
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the video we're gonna focus on why and
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how
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that might change so i did the boring
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stuff and i looked at the gptc
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documentation and the real interesting
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thing about gbtc is it works like uh
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some special type of vacuum cleaner but
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nothing
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comes out see that trust periodically
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opens up to investors who need to invest
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in batches of fifty thousand dollars
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and then the trust gathers this all this
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money from these investors to buy
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bitcoin which then adds to assets under
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management so the trust unit holders are
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locked in for six months before they can
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sell their units on the public market
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but the very
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interesting thing is there are no
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redemptions so meaning that the trust
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unit holders cannot really use their
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units to get
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bitcoins out from gbtc from the trust so
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that means all the bitcoins
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inside gbtc inside grade scales bitcoin
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trust can never
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come out so they hold physical bitcoin
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and we can compare this say to gld etf
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which is the largest etf that holds
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physical gold and they just
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charge 0.4 so holding bitcoin is more
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expensive than holding physical gold
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the warehouse security testing
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procedures things in finance can be so
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weird
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so for simplicity here i have a summary
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of the fun so gptc has no leverage so it
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doesn't borrow money it also doesn't pay
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dividends because bitcoin doesn't pay
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dividends and it's sitting on 26 billion
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dollars in bitcoin so it is the largest
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public holder
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of bitcoins the trust charges two
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percent crazy and it has no closing date
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also there is no redemption scheme so it
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can't really sell off or reduce its
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bitcoin holdings so if we look at this
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graph again you can see that gptc
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traded at a premium before but ever
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since march 2021 this year
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that premium disappeared and at one
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point you could buy
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one dollars worth of bitcoin for 80
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cents because the discount actually
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reached 20
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but today still you can buy one dollar
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worth of bitcoin for 90 cents so from a
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traditional
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investing perspective when the price and
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the value are deviating
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that presents opportunities the bigger
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the gap the bigger we should be
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salivating because that's a margin of
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safety and the ideal gap
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is really like 30 between value and
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price remember for gbtc we aren't really
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sure
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how long it would take to close this gap
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and what steps gbtc will actually do
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so in the middle of march digital
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currency group which is the parent
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company
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of grayscale they announced to buy back
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250 million dollars so the less shares
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in the market that would really help
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close this discount gap and by may 3rd
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they announced that they've already
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bought back
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194 million worth of shares they still
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get 500 million
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fees though that's why the parent
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company digital currency groups say they
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will increase
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its sharing purchases to 750 million
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dollars
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hoping that this would close the
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discount gap so this probably did help
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reduce the discount from 20 to
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now around 10 but will it continue to
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shrink discount gap
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probably not too much in my take because
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of the structure because unlike etfs you
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can't really issue or redeem
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shares to close a gap between the price
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of the fund
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compared to the funds underlying you can
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check out my video here if you need more
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insights into etfs
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so that's why gbtc said they're also
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looking forward to converting into an
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etf
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but converting into an etf will affect
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the fee structure
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i don't think they'll get away with two
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percent fees on this etf
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but newsflash there's already 11 bitcoin
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etfs lighting up
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waiting to be approved all those waiting
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to be approved here it's already on the
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scc's table probably one away from
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input from the us treasury and the white
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house anything great for bitcoin which
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is like alternative currency
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is equivalent to shorting the dollar but
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still the demand is there there are
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large shareholders large institutional
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buyers of gbtc
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and we probably recognize some of the
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big names here these are
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institutional buyers of gbtc and you see
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arc here
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the famous co-founder of arc investments
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kathy wood did say
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that she sees the price of bitcoin going
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to 400 000 and beyond which i explain
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more about her reasoning in this video
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here
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time for prediction time now here's the
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warning i'm wrong 11 times out of 10
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when i predict things but here
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goes scc will refuse to grant or handle
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grayscale's bitcoin etf application
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because it's really
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a political statement that's quite big
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since the us treasurer still
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associates bitcoin with illegal
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activities so how can the sec
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approve something which is so against to
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what the government stands
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i also think that the bitcoin discount
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in the gbtc will actually still be there
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so what i think will happen is grayscale
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will increase again the share buybacks
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more than the 750 million just to close
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the gap i also predict that gptc
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will reduce its fee price that two
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percent to just to make itself a bit
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more competitive they will probably
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reduce slightly maybe 1.75
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1.5 percent just to attract those flows
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back to invest and trade gptc because
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there will be more bitcoin etfs approved
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it's just not going to be in america
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and what we also might see is that
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grayscale will probably accelerate its
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effort to launch
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more trust on alternative cryptocurrency
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coins you know because they already have
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these already and it's really amazing to
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see
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that grayscale's bitcoin product this
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trust it's already the cheapest
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even is that two percent fees you can
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see the rest here they have 2.5 percent
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three percent fees
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it's really crazy so perhaps we would
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see again great scale to launch more
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otc trade trust on these alternative
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cryptocurrency coins this is so
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lucrative for them there you have it my
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predictions be warned
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