Grayscale Premiums Are Through the Roof
Grayscale is taking the trading world by storm. It is currently responsible for more than $5 billion in digital assets, which is about 40 percent higher than the figure it oversaw in early summer at the conclusion of its second quarter.
Grayscale Premiums for Two New Trusts Are Huge
Recently, the company released two new crypto trusts, one for Litecoin and the other devoted to bitcoin cash. While this would be fantastic news in most circles, there are some analysts that question how the trusts are being run and whether the crypto space has reached the level of maturity we all think it has since the great bitcoin boom of 2017. The premiums that both these trusts are demanding are more than 1,000 percent.
Both trusts have been available publicly for over two weeks and have seen their premiums grow exponentially since then. The Litecoin trust, for example, was for a short period trading at a premium that exceeded $1,200 percent according to a report from Arcane Research.
By comparison, the bitcoin trust that Grayscale has become so famous for is trading at a premium of around 20 percent, and the Ethereum trust the company offers has fallen below the 100 percent premium threshold for the first time ever. Just last June, the trust was trading beyond an 800 percent premium.
The big question is, “How can these two trusts be so low when the Litecoin and bitcoin cash trusts exhibit some of the highest premiums known to traders anywhere?” Vetle Lunde of Arcane research explains the situation:
These trusts are based solely on single assets and should thus not outperform their underlying assets over time. The excess return should be arbitraged away. For accredited investors, the custody provided by Grayscale is most certainly of value. Setting up self-custody is a complicated process, and over time, Grayscale has gained confidence in their services as a custody provider.
The Prices Probably Don’t Matter
However, some analysts are confident that many of the investors involved with Grayscale probably don’t know that they’re paying such high premiums. In response to that, Lunde explained:
Bitcoin exposure as an inflation hedge amidst the current financial instability seems to be a trending topic among some of the most renowned macro investors… This could make new investors more open to allocate some of their portfolios into bitcoin, and thus lead to an increased demand for bitcoin exposure.
It sounds like what’s being said here is that even if these investors knew how much they were paying they probably wouldn’t care. With the harsh economic conditions the world is facing right now, fiat and other assets are appearing less sturdy as time goes by, and bitcoin is being seen as an official “safe haven” asset that can potentially keep people’s wealth intact during times of strife.