Grayscale Investment‘s Bitcoin (BTC) investment trust, Grayscale Bitcoin Investment Trust (GBTC), has rewarded contrarian investors who invested at the beginning of January when major drops were observed in cryptocurrencies and adjacent markets. According to the latest data, GBTC shares have increased by 220% since the beginning of the year. The best-performing stock of the S&P 500, Nvidia (NVDA), showed an increase of 198% during the same period, performing below GBTC’s performance.
According to the data provided by TradingView, GBTC shares have increased by 220% to $26.79 since the beginning of the year. Meanwhile, the best-performing stock of the S&P 500, NVDA, increased by 198% during the same period, and the index as a whole recorded a 9% gain. Bitcoin, on the other hand, doubled its value since the beginning of the year and reached $35,000, while traditional fixed-income instruments like government bonds collapsed.
The outstanding performance of GBTC is attributed to the increasing hopes that the U.S. Securities and Exchange Commission (SEC) will approve the transformation of Grayscale Bitcoin Trust into an open-ended exchange-traded fund (ETF) for Bitcoin investments. The optimism is reflected in the decrease of GBTC shares’ discount from 46% to 13% this year, and investors have seen the opportunity to hedge against downward risks by selling BTC in the spot/futures market while buying GBTC shares. The conversion of the trust into a spot Bitcoin ETF will restore the price to its net asset value (NAV) according to market makers.
Ilan Solot, Co-Head of Digital Assets at Marex Solutions, said, “GBTC continues to be a gift that keeps on giving to its investors. Congratulations to those that played against the discount, causing it to decrease (many on this list).” According to experts, the two-legged investment strategy aimed at profiting from the decrease in GBTC’s discount may have limited investors’ gains in Bitcoin earlier this year.
Spot Bitcoin ETF’s Risk: Short Pressure
Bitcoin’s price surged by 28% in less than two weeks, reaching above $35,000, fueled by positive rumors about BlackRock, the world’s largest asset management company, listing its spot Bitcoin ETF ticker, IBTC, on DTCC’s clearinghouse website.
It is expected that the SEC will approve multiple spot Bitcoin ETFs early next year. While there is a consensus that BTC will surpass $50,000 after the approval of ETFs, some experts warn about the possibility of additional selling pressure due to financialization. Blume also stated, “ETFs will also allow for more institutional participants to short the instrument. How this will impact the market is uncertain.”