The Grayscale Bitcoin Trust (GBTC), originally launched in 2013 as the Bitcoin Investment Trust (BIT), is the world’s largest bitcoin fund and the first investment vehicle of its kind that regularly reports financials the the SEC.
The Grayscale Bitcoin Trust offers investors the opportunity to gain exposure to the leading cryptocurrency via an open-ended private trust that holds in excess of 649,130 BTC as of this writing – which equates to nearly 3.1% of bitcoin’s current circulating supply.
It is a very convenient method for investors to purchase investment exposure to Bitcoin. As is typically the case, in general, people will pay extra for convenience.
For the past year, the amount that investors will pay for that convenience which is above the actual Bitcoin value, titled “premium to net asset value,” has mostly ranged between 5% and 25%.
Those facts are pretty straightforward and are easy to accept based upon understanding how financial markets function as well as simple common sense.
This is where it gets quite interesting.
As is the case with the Bitcoin Trust, one would expect that investors would be willing to pay a little extra for the convenience factor when investing in Litecoin using this investment vehicle.
Throw those expectations out with the trash.
For most of the past 3 months, investors in Grayscale’s Litcoin Trust have been paying more than 1000% ABOVE the value of the actual Litecoin (LTC) in the trust.
To place this into perspective, at the time of this publication, Litecoin could be purchased on Coinbase for about $187. To buy the equivalent of one Litecoin worth of LTCN based upon Friday’s closing price would cost you $2,678! During the week the price to do so exceeded $3,121.
Someone is really, really, REALLY eager to buy Litecoin, and is willing to pay more than ten times the going rate for it!
Have a look at this tweet from Litecoin:
The price being paid to buy Litecoin through Grayscale is simply not rational.
Why is it being done?
There is no concrete, provable answer to that question, only speculation.
What – if anything – do some inside players know that the rest of us don’t?