Growing Pain

  1. Leverage in the Grayscale Trust: Many players (most famously Three Arrows and BlockFi) have been using GBTC and ETHE as part of their cash-and-carry strategy, banking on Grayscale Trust’s NAV premium over futures premium. With crypto-ETFs on horizon, Grayscale Trust’s premium almost gone (Chart 1, 2), and additional 280mio GBTC shares created in the last 6 months (that will be free-standing in 6 months), it is entirely feasible that the NAV might turn negative, causing massive losses and creating negative feedback loop in both the spot and funding market.
  2. Regulatory risk: High profile purchase of Bitcoin by Square and Tesla and MicroStrategy’s debt-raising to buy Bitcoin would definitely put cryptocurrencies under regulatory scrutiny.
Chart 1: GBTC Premium, Source: Glassnode
Chart 2: ETHE Premium, Source: Glassnode
(Mar 01, 2021 Top 5 Crypto KPI)
Chart 3: Canadian Close-End Fund NAV Premium/Discount

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store