Interpreting Grayscale Premiums: GBTC, ETHE

4 min readAug 1, 2020

This article was additionally published by Coinmotion, the leading digital asset exchange in Nordics.

Arguably the most widely known investment product of digital asset industry, Grayscale’s Bitcoin Trust (ticker: GBTC), has evolved into the de facto indicator of bitcoin’s market sentiment. One of the most interesting aspects of GBTC has been its premium over bitcoin’s price, exceeding 132,6 percent in late May 2017.

“The premium is the amount you’re willing to pay to not custody your own private key, and still get exposure to the underlying asset.” - Ryan Alfred

In addition to Bitcoin Trust, Grayscale also manages Ethereum Trust (ticker: ETHE), launched in 2017. ETHE has experienced even larger premiums, 986,9 percent in late August 2018. While ETHE’s inception dates back to 2017, it only became available on OTC markets last summer, on June 20th 2019.

For the time being, GBTC is the only stock offered on NASDAQ or any United States public stock exchange that holds bitcoin as its primary asset. It is also one of the few choices for investing in bitcoin without buying the asset directly.

Grayscale’s product portfolio has been exceptionally popular among institutional investors as the attached graph shows. During the second quarter of 2020, 84 percent of Grayscale’s investors were institutional, this segment was largely composed of hedge funds.

Grayscale Bitcoin Trust (GBTC)

Grayscale Bitcoin Trust’s premium to net asset value (NAV) has seen two sharp declines in first half (H1) of 2020, declining from 40 percent into low 20s close to tail end of first quarter. GBTC’s premium declined again in late second quarter, from 20% level into 10% and below.