The premium on the new Litecoin fund is currently 753%. In the case of Bitcoin Cash, the market premium is 351%.
On August 18th, Grayscale announced the trading of the shares of two cryptocurrency funds based on Litecoin and Bitcoin Cash, respectively. Thus, the crypto investment company completes an offer of 10 funds, which began with the Bitcoin fund (GBTC), with a total amount of assets under management (AUM) above USD 6,000 million.
Grayscale’s Litecoin and Bitcoin Cash funds already existed, but the trading of the respective shares on the secondary market effectively began on August 17th. Arcane Research revealed that the shares of Grayscale’s Litecoin fund have a net LTC value of USD 5.9. Given that the share price on the secondary market started at USD 50, the initial premium on the Litecoin fund was 753%, compared to the price of USD 59.43 on the regular market.
Regarding the Bitcoin Cash fund, the Net Asset Value (NAV) of BCH is USD 2.8 and its price on the initial secondary market was USD 12.5. This represents a premium of 351%, according to Arcane Research’s calculations.
A distinctive feature of this type of funds is that Grayscale assigns each share a value specific to the respective cryptocurrency. Then it assigns a premium value to the said share, above its market price, according to the demand.
After a stipulated waiting period (of 6 months in the case of GBTC), holders can trade their shares on the secondary market. Regardless of whether the premium is high, the dynamics of supply and demand for those shares can be attractive to some investors.
Investments in the GBTC fund exceed USD 5,000 million, while the sums of assets that Grayscale manages are USD 6,129 million.
Dynamics of Premiums in Grayscale
GBTC attracts 82% of investments in Grayscale funds, with each share containing USD 11.60 worth of BTC. On August 20th, Arcane Research recorded a price of that share on the secondary market of USD 14.30, that is, a 23% increase compared to the spot price of Bitcoin. This premium on GBTC fund shares has reached up to 35% in previous months.
In the Ethereum fund (ETH), the demand has been considerably higher, raising the premium on the respective shares above 800%. This occurred in June, coinciding with the explosive growth of decentralized finance.
The introduction of the COMP token on the Compound lending platform, last June, contributed to tripling the total value locked on DeFi platforms in a few weeks. Most of these platforms run on Ethereum, as the community well knows.
The magnitude of the assets that Grayscale manages (USD 6,129 million) is minimal, compared to the total market capitalization of cryptocurrencies (just 1.6%). However, it is very close to USD 6.7 billion worth of value currently locked on DeFi platforms.
The value of the assets that Grayscale manages is equivalent to 92% of the total value of decentralized finance, while the value of the assets invested in GBTC is equivalent to 75% of the value locked on DeFi platforms.
Regarding the high percentage of Bitcoin that Grayscale has acquired, compared to the BTC mined in the first quarter of this year, the cryptocurrency investment company is reportedly using a method of payment in cryptocurrencies. Consequently, the total BTC that it acquired was much less than it initially announced.
By Willmen Blanco
