Grayscale Investments’ trust fund GBTC is still trading at a 25% discount compared to the price of Bitcoin. The strong inflows going into the ProShares Bitcoin Strategy exchange-traded fund (ETF) (BITO) in the last two weeks pushed the company’s Bitcoin’s exposure to record highs.
The fund uses futures contracts to gain some exposure to Bitcoin’s price movements. It had a record 28,450 BTC under its management which is worth nearly $1.27 billion at the current price as of March 25. That amount is compared to around 26,000 BTC reported a month before, according to official data from ProShares.
Notably, the inflows came in the days leading up to the “rollover” of BITO’s 3,846 March future contracts in the week that ended on March 25. To recap, a rollover features traders moving their futures contracts with their expiry coming up to a longer-dated contract so that it can maintain the same position.
BITO’s rolling periods normally follow an increase in Bitcoin net outflows, noted Arcane Research in its most recent report, while citing the last rolling period that came up as a result of the market uncertainty caused by the Russia-Ukraine conflict.
As of March 21, it also saw an inflow of 225 BTC to its coffers just as BITO rolled its 437 March contracts to April. That move made Arcane to see a thriving institutional demand for the fund. It wrote in its report:
“The strong inflows to BITO suggest that Bitcoin appetite through traditional investment vehicles is increasing.”
BITO witnessed constant net inflows for the rest of the week, according to more data provided by Glassnode.
Bitcoin Going To $50K?
Inflows to the ProShares Bitcoin ETF increase happened simultaneously with a rally in the spot BTC market on March 25.
On March 25, Bitcoin gained another 2.5% to surpass $45,000, which is its highest level in three weeks. However, it is currently consolidating around $44,500 awaiting the next price action. One co-founder of crypto wallet service MinePlex, Alexander Mamasidikov, said that the price of Bitcoin might surge to reach $50,000 in the coming days.
“The growth seen in the ProShares BTC ETF to a new all-time high of 28,000 BTC is proof that the clamor for a Bitcoin-linked exchange-traded fund product is backed by an active demand. These positive price trend activities have impacted BTC thus far and a sustained accumulation or investment from both retail and institutional investors is poised to push the coin to form strong support above $50,000 towards mid-April.”
Is There Love For Grayscale?
Institutions have been picking ProShares Bitcoin EFT over Grayscale Bitcoin Trust (GBTC), a fund that is currently trading at a 25% discount compared to spot Bitcoin.
The issue with going for GBTC over BITO is that its discount keeps growing. That means investors would remain at the risk of the underperforming spot Bitcoin, at a higher rate that the risk that comes with BITO which trades almost 2% lower than the current Bitcoin prices.
However, there is still a small chance of GBTC coming up as the winner. The New York-based investment firm backing GBTC, Grayscale Investments, has expressed its interest in changing the trust fund into a spot Bitcoin-backed ETF. If that happens, GBTC’s 25% discount needs to return to zero.
Ryan Wilday, a veteran financial analyst in an analysis published sometime in February, said:
“Buying BITO shares guarantees you will underperform Bitcoin. And buying GBTC shares likely results in similar or worse underperformance compared to BITO, with a very slim chance of outsized performance in the event GBTC is turned into a spot ETF.”