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Timing GBTC Based on Its Inferred Premium

| | Posted in: Currency Trading, Fundamental Valuation

"Evolution of Bitcoin as an Investment" suggests a shift toward acceptance of Bitcoin (BTC) as an investment asset, as do recent actions by some large investors. Grayscale Bitcoin Trust (GBTC) offers a way for investors to access BTC via a fund that manages BTC holdings. GBTC price generally carries a premium over its BTC holdings in consideration for this convenience (17% as of the end of 2020). Does variation in this premium indicate good times to buy and sell GBTC? To investigate, we use the ratio GBTC/BTC (with BTC divided by 1,000 because the prices greatly differ in scale) as an easy way to infer the premium. We then look at ways to exploit variation in the ratio to buy and sell GBTC. Because of the rapid evolution of Bitcoin, we limit analysis to recent data. Using daily closing prices of GBTC and BTC during 2019 through 2020, we find that:

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