Thanks to crypto enthusiasm: This asset even outperforms NVIDIA shares

• Grayscale Bitcoin Trust outperforms NVIDIA stock
• Conversion into Bitcoin ETF is sought
• Net asset value currently higher than GBTC price

The NVIDIA share on the US stock exchange NASDAQ has gained around 179 percent since the beginning of the year (as of: closing price on October 31, 2023). This makes it the share with the best performance among all stocks in the market-wide US index S&P 500. In 2023, NVIDIA shares were able to benefit above all from the hype surrounding artificial intelligence (AI), because the company is taking part in the global market for special AI processors, which are required for AI applications such as the chatbot ChatGPT, occupy a dominant position. But even though NVIDIA stock has had an exceptional run, there is another asset that has performed even better since the beginning of the year. This was mainly due to the slowly returning crypto enthusiasm.

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Price of the Grayscale Bitcoin Trust has more than tripled since the beginning of the year

Last week, hopes of a possible approval of physically deposited BTC ETFs drove the price of the oldest cryptocurrency Bitcoin back above the $32,000 mark for the first time in months and twice to a high since May 2022 at more than $35,000 . But it’s not just the best-known digital currency that is currently on the rise. The Grayscale Bitcoin Trust (GBTC) also recently made significant gains. While the investment product, which according to its own statements invests “exclusively and passively in BTC”, was still trading at $8.29 at the end of 2022, the last closing price was $26.48. This corresponds to an increase of around 219 percent since the beginning of the year (as of: closing price on October 31, 2023). The Grayscale Bitcoin Trust has performed better overall than NVIDIA shares so far in 2023.

Hope for physically deposited Bitcoin ETF revives industry

While the entire crypto market was in a very dreary phase at the beginning of the year, life has recently returned to the sector. This is thanks to the possible approval of Bitcoin spot ETFs by the US Securities and Exchange Commission (SEC). According to “CoinDesk”, a corresponding approval on the market is now generally expected at the beginning of next year. While the Bitcoin price has roughly doubled since the start of the year, the Grayscale Bitcoin Trust did significantly better with its price tripling. There had already been positive impulses here over the course of the year after a US appeals court overturned an SEC decision that had prohibited Grayscale from listing a Bitcoin ETF and the SEC subsequently decided not to appeal. On October 19, Grayscale filed a new registration statement for a Bitcoin ETF with the SEC. The company’s ultimate goal is to convert the existing Grayscale Bitcoin Trust into an open, physically backed Bitcoin ETF. GBTC is ready to operate as an ETF after receiving regulatory approvals and looks forward to “expeditiously working with the SEC on these matters,” according to the Grayscale website.

Investors are hoping for the green light to convert GBTC

According to “CoinDesk”, GBTC’s outperformance is mainly based on the hope that the SEC will give the green light for this conversion. This is also shown by the discount between the price of the Grayscale Bitcoin Trust and its net asset value. The latter corresponds to the value of the Bitcoin held, as the trust says it “invests exclusively in BTC and generates value from the price of BTC”. This discount has now narrowed from almost 50 percent at the beginning of the year to around 13 percent. This means that the Bitcoin held by the Grayscale Bitcoin Trust is still worth more than all the fund shares combined. If the conversion is approved, the spread is likely to narrow further and the GBTC price will align with the net asset value. “As approval of the GBTC ETF conversion becomes increasingly likely, investors know that market makers will bring the price back to NAV as soon as it does [der umgewandelte ETF; Anm. d. Red.] begins trading,” Alexander S. Blume, managing partner at Two Prime Digital Assets, told “CoinDesk.” As things stand, there is still further upward potential for the Grayscale Bitcoin Trust.

But converting GBTC into an ETF could also have disadvantages. According to “invezz”, Grayscale’s revenue could suffer significantly from this step. The company currently charges a management fee of two percent for the Grayscale Bitcoin Trust. This is therefore significantly higher than the fees that are normally charged for an ETF and may have to be reduced if the trust is allowed to be converted – also in view of the expected competition, as several other large institutions are also applying for a Bitcoin spot ETF filed with the SEC.

Among other things, the fund company ARK Investment Management, led by star investor Cathie Wood, has also submitted a corresponding application. So far, Wood has relied heavily on the Graycale Bitcoin Trust with the ARK Next Generation Internet ETF: with a share of 11.18 percent, this is the largest position in the ETF’s portfolio (as of October 31, 2023). However, this could change if its own Bitcoin ETF is approved. According to “Cointelegraph”, it is quite likely that in this case Cathie Wood will completely kick the GBTC shares out of the ARK Next Generation Internet ETF depot in favor of her own ETF – which would result in further loss of income for Grayscale.

Editorial team finanzen.net

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