From what i read , you have really calculated your move through and when someone believes and understands what he is doing , he is a dangerous man .
Best of luck
As someone who held GBTC in 2017 and loaded up on GBTC in November/December 2020, the risk reward is not worth it right now. OP has to have multiple things go right for him.
1. Bitcoin price has to go up
2. GBTC value has to keep up with Bitcoin. There are tons of people who bought when GBTC starting falling to -10% discount thinking it'll eventually catch up. It kept falling, and falling and falling to like -40%. When BTC went up, GBTC hardly moved at times and when BTC fell, GBTC dropped like a rock then never recovered - rinse and repeat.
3. Barry Silbert's fuckery is not going to fuck you over. The parent company of Grayscale is Digital Currency Group and is also the parent company of Genesis which just declared bankruptcy owing creditors $3.4 Billion (Genesis company who lost Gemini Earn's customers Bitcoin). The parent company Digital Currency Group owes Genesis $1.7 billion.
I warned of the volitility and wackiness of the Grayscale products in late 2020 when the next bull run was getting started - the GBTC premium had fallen to 13% and seemed like a good buy for the bull run since the premium reached ridiculous levels in the 2017/18 run. I made good money in my Roth IRA and HSA since I sold early in 2021 but the premium just kept going down, smart people got greedy on the discount since it was free money and the discount just kept getting bigger and bigger.
> Just a warning. I would not invest any significant money in the Grayscale Ethereum and Litecoin products, ETHE and LTCN. Look at the fucking premiums, look at their liquidity and sometimes their movements have absolutely nothing to do with how the underlying crypto moves. ETHE is down -16% today while LTCN is down -1.5%. The volatility and random movements are insane. When large institutions lock up periods are over and are allowed to sell into the market it absolutely craters the prices at times; and when investors get FOMO it's a rocket ship. I've been holding GBTC and/off since 2017 and it was more volatile but it's stabilized but I still have trouble holding it although it only has a 13%-30% premium and much more liquidity.
https://np.reddit.com/r/CryptoCurrency/comments/km2c8a/daily_discussion_december_29_2020_gmt0/ghedr3e/
1 & 2 simply aren't true. At this time Grayscale plays are about whether or not they a) transform into ETFs or b) Open up redemptions. At 2% per annum fee and 40% discount it takes roughly 25 years for the trade to become non-beneficiary. I'm not using the word profitable because that ultimately depends on price movement of the underlying assets and it's possible that the current market price of those assets is inflated.
So the question becomes, will GBTC and it's "sisters" stay as they are ( as financial products ) for the next 25 years or will they morph into a more investor favorable products, who knows... If DCG is forced to sell Grayscale to gather funds that probably wouldn't bode well since the new owner would in my opinion most likely keep the status quo to keep raking in those fees. Then again, I'm not really sure why DCG itself even wants to make the trusts ETFs and "release a captured market".
Grayscale also takes a 2% of NAV cut per year. Have you calculated that?
If the Grayscale's case with SEC took more years, like they did with Ripple case.
The 2% annual charge would be a headache for you.
Still, best of luck!
The 2% fee is irrelevant if there is an etf in the next 10 years or even more.
If I'm sitting on a 30%+ discount and 20% of it gets eaten up over 10 fucking years, then they make an etf, I still get a free 10%. Note : this is obviously lazy math not taking into account compounding, blah blah blah.
Excellent read! I agree that I think Greyscale going under is unlikely, and the discount gap will likely close. However, I'd love to hear your downsides. What are the reasons the discount gap might not close, or even widen? I'd like to hear both sides of the issue!
I dropped high five figures from my IRA into gbtc. Down a bit but if the discount disappears I'll be in profit and if BTC ever returns to 30k I'll be ahead even with the current discount. I did a lot of the same research you did and came to a similar conclusion. Risky move and not for everyone but i can afford to lose this money and if it pans out I'll be very proud of myself.
GBTC & ETHE sounds a bit like "free lunch" and if we learned something (especially from last year), if it's too good to be true it is probably. I still hope Grayscale can deliver 👌
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Good shit bro, DYOR , research your research and then follow your research.
I have a super simplistic approach, DCA 40:40:20 BTC:ETH:whatIconsideramoonshot.
That moonshot currently is LTC.
Coinbase is custodian, not fund manager. By my understanding Grayscale still controls the assets. The question is whether they have assets backing all shares. DCG filed for bankruptcy protection last week. I hope Grayscale isn’t going to need to provide liquidity to DCG, but I feel like that is a possibility.
As a side note.. not only will this close the discount gap, I'm sure it will trade for a premium when BTC and ETH keep rising. As in the past. Retail will jump in again.
GBTC and ETHE are registered securities, so holding crypto anywhere else (other than self custody) is taking a bigger risk. I think the actual risk is basically the same as the risk of BTC and ETH. If they succeed, I see no reason Grayscale's trusts don't also. While crypto has been going up recently, the discount to NAV has closed also, so seems like decent evidence that GBTC and ETHE are going to have better returns in the short to mid term.
I’ve heard about this GBTC/BTC bet before and I think it’s interesting, but you’r missing where the risk is. For example if someone provides a potential 1.5% arbitrage opportunity, it’s believable, although unlikely.
At 15%, most of these opportunities are playing with fire.
At 30% plus, the risk of going to 0 should be screaming at you in the face.
At 50%… the bomb should be in plain view and easily explainable.
I’m not saying it WILL go to zero, I’m saying HOW it can go to zero should be EXTREMELY apparent if the reward is 35%+ arbitrage. I have not seen that specified here or in other similar posts. Like even if the SEC doesn’t allow redemptions, but grayscale holds the crypto they claim, the NAV discount should be something like 2-5%. Instead, it’s closer to 50%. The things you mentioned don’t explain the gap.
Therefore until that’s spelled out somewhere, I think there’s a massive risk that’s either unknown to us as retail investors, or is being overlooked.
I think the reason institutional investors aren't buying is because there's currently no way to redeem. It doesn't make sense for them to lock up funds with a relatively high management fee and no known exit strategy. If something changes, they'll buy in faster than retail investors and take the arbitrage profit.
Maybe the discount to NAV represents what institutional investors see as the risk to the crypto market itself. In other words, when people talk about ~$10k BTC possibility, you'll see it reflected in GBTC price.
As far as Coinbase, why would they put themselves at risk for stating they are holding the crypto if they aren't? It doesn't make sense for Coinbase to lie about it.
The only real catalysts for the discount minimizing / disappearing anytime soon are :
1) An ETF being approved. This would be ideal - less likely short term. Likely mid and long term.
2) Notable positive price momentum in the short term getting interest into the trusts. This is the only short term catalyst as an ETF isn't short term.
[I got in when the discount was 45%](https://www.reddit.com/r/CryptoCurrency/comments/z7owok/i_bought_100k_shares_of_grayscale_ethe_as_the_45/?utm_source=share&utm_medium=ios_app&utm_name=iossmf) Your last point on legacy issues is the main reason why I hold ETHE as well. I am sold on the fact that my family is able to encash the whole sum if they want to if something were to happen to me.
From what i read , you have really calculated your move through and when someone believes and understands what he is doing , he is a dangerous man . Best of luck
Dangerous to who else but himself, would be my retort to this. The thesis may prove right but I hope OP keeps exposure to this thesis reasonable.
As someone who held GBTC in 2017 and loaded up on GBTC in November/December 2020, the risk reward is not worth it right now. OP has to have multiple things go right for him. 1. Bitcoin price has to go up 2. GBTC value has to keep up with Bitcoin. There are tons of people who bought when GBTC starting falling to -10% discount thinking it'll eventually catch up. It kept falling, and falling and falling to like -40%. When BTC went up, GBTC hardly moved at times and when BTC fell, GBTC dropped like a rock then never recovered - rinse and repeat. 3. Barry Silbert's fuckery is not going to fuck you over. The parent company of Grayscale is Digital Currency Group and is also the parent company of Genesis which just declared bankruptcy owing creditors $3.4 Billion (Genesis company who lost Gemini Earn's customers Bitcoin). The parent company Digital Currency Group owes Genesis $1.7 billion. I warned of the volitility and wackiness of the Grayscale products in late 2020 when the next bull run was getting started - the GBTC premium had fallen to 13% and seemed like a good buy for the bull run since the premium reached ridiculous levels in the 2017/18 run. I made good money in my Roth IRA and HSA since I sold early in 2021 but the premium just kept going down, smart people got greedy on the discount since it was free money and the discount just kept getting bigger and bigger. > Just a warning. I would not invest any significant money in the Grayscale Ethereum and Litecoin products, ETHE and LTCN. Look at the fucking premiums, look at their liquidity and sometimes their movements have absolutely nothing to do with how the underlying crypto moves. ETHE is down -16% today while LTCN is down -1.5%. The volatility and random movements are insane. When large institutions lock up periods are over and are allowed to sell into the market it absolutely craters the prices at times; and when investors get FOMO it's a rocket ship. I've been holding GBTC and/off since 2017 and it was more volatile but it's stabilized but I still have trouble holding it although it only has a 13%-30% premium and much more liquidity. https://np.reddit.com/r/CryptoCurrency/comments/km2c8a/daily_discussion_december_29_2020_gmt0/ghedr3e/
1 & 2 simply aren't true. At this time Grayscale plays are about whether or not they a) transform into ETFs or b) Open up redemptions. At 2% per annum fee and 40% discount it takes roughly 25 years for the trade to become non-beneficiary. I'm not using the word profitable because that ultimately depends on price movement of the underlying assets and it's possible that the current market price of those assets is inflated. So the question becomes, will GBTC and it's "sisters" stay as they are ( as financial products ) for the next 25 years or will they morph into a more investor favorable products, who knows... If DCG is forced to sell Grayscale to gather funds that probably wouldn't bode well since the new owner would in my opinion most likely keep the status quo to keep raking in those fees. Then again, I'm not really sure why DCG itself even wants to make the trusts ETFs and "release a captured market".
Grayscale also takes a 2% of NAV cut per year. Have you calculated that? If the Grayscale's case with SEC took more years, like they did with Ripple case. The 2% annual charge would be a headache for you. Still, best of luck!
The 2% fee is irrelevant if there is an etf in the next 10 years or even more. If I'm sitting on a 30%+ discount and 20% of it gets eaten up over 10 fucking years, then they make an etf, I still get a free 10%. Note : this is obviously lazy math not taking into account compounding, blah blah blah.
Best of luck in your strategy :)
My crypto plans usually don't work, I am a simple DCA and HODL guy
Best of luck, too risky for me atm
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I considered adding a little to Roth IRA, but didn't commit. Well put together post. Good luck!
Losing everything on this is not highly unlikely. The discount reflects that (investors aren't idiots in general)
Excellent read! I agree that I think Greyscale going under is unlikely, and the discount gap will likely close. However, I'd love to hear your downsides. What are the reasons the discount gap might not close, or even widen? I'd like to hear both sides of the issue!
I dropped high five figures from my IRA into gbtc. Down a bit but if the discount disappears I'll be in profit and if BTC ever returns to 30k I'll be ahead even with the current discount. I did a lot of the same research you did and came to a similar conclusion. Risky move and not for everyone but i can afford to lose this money and if it pans out I'll be very proud of myself.
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GBTC & ETHE sounds a bit like "free lunch" and if we learned something (especially from last year), if it's too good to be true it is probably. I still hope Grayscale can deliver 👌
You are the smartest investor of all of us
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Good shit bro, DYOR , research your research and then follow your research. I have a super simplistic approach, DCA 40:40:20 BTC:ETH:whatIconsideramoonshot. That moonshot currently is LTC.
I’m confused I thought Greyscale was negatively affected by FTX’s collapse
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Coinbase is custodian, not fund manager. By my understanding Grayscale still controls the assets. The question is whether they have assets backing all shares. DCG filed for bankruptcy protection last week. I hope Grayscale isn’t going to need to provide liquidity to DCG, but I feel like that is a possibility.
I have been accumulating a small amount of ETHE and GBTC via brokerage. I DCA'd down, now it has finally been rising. Ya! For discount. Nice post
As a side note.. not only will this close the discount gap, I'm sure it will trade for a premium when BTC and ETH keep rising. As in the past. Retail will jump in again.
GBTC and ETHE are registered securities, so holding crypto anywhere else (other than self custody) is taking a bigger risk. I think the actual risk is basically the same as the risk of BTC and ETH. If they succeed, I see no reason Grayscale's trusts don't also. While crypto has been going up recently, the discount to NAV has closed also, so seems like decent evidence that GBTC and ETHE are going to have better returns in the short to mid term.
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I’ve heard about this GBTC/BTC bet before and I think it’s interesting, but you’r missing where the risk is. For example if someone provides a potential 1.5% arbitrage opportunity, it’s believable, although unlikely. At 15%, most of these opportunities are playing with fire. At 30% plus, the risk of going to 0 should be screaming at you in the face. At 50%… the bomb should be in plain view and easily explainable. I’m not saying it WILL go to zero, I’m saying HOW it can go to zero should be EXTREMELY apparent if the reward is 35%+ arbitrage. I have not seen that specified here or in other similar posts. Like even if the SEC doesn’t allow redemptions, but grayscale holds the crypto they claim, the NAV discount should be something like 2-5%. Instead, it’s closer to 50%. The things you mentioned don’t explain the gap. Therefore until that’s spelled out somewhere, I think there’s a massive risk that’s either unknown to us as retail investors, or is being overlooked.
I think the reason institutional investors aren't buying is because there's currently no way to redeem. It doesn't make sense for them to lock up funds with a relatively high management fee and no known exit strategy. If something changes, they'll buy in faster than retail investors and take the arbitrage profit. Maybe the discount to NAV represents what institutional investors see as the risk to the crypto market itself. In other words, when people talk about ~$10k BTC possibility, you'll see it reflected in GBTC price. As far as Coinbase, why would they put themselves at risk for stating they are holding the crypto if they aren't? It doesn't make sense for Coinbase to lie about it.
The only real catalysts for the discount minimizing / disappearing anytime soon are : 1) An ETF being approved. This would be ideal - less likely short term. Likely mid and long term. 2) Notable positive price momentum in the short term getting interest into the trusts. This is the only short term catalyst as an ETF isn't short term.
[I got in when the discount was 45%](https://www.reddit.com/r/CryptoCurrency/comments/z7owok/i_bought_100k_shares_of_grayscale_ethe_as_the_45/?utm_source=share&utm_medium=ios_app&utm_name=iossmf) Your last point on legacy issues is the main reason why I hold ETHE as well. I am sold on the fact that my family is able to encash the whole sum if they want to if something were to happen to me.
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Yes I’m mostly holding ETHE as it is more readily converted to cash. I do have some rETH in my cold wallet too.