22 Oct 2021 · 2 min read

MicroStrategy's and Grayscale Bitcoin Trust's Shares Now Compete with ETFs

Source: Adobe/monticellllo

The returns for shareholders in two popular proxies for the bitcoin (BTC) price, namely MicroStrategy (MSTR) and the Grayscale Bitcoin Trust (GBTC), have fallen well behind those of spot bitcoin holders this year, with some speculating that the two investment vehicles are no longer needed now that bitcoin ETFs exist.

Year-to-date, MicroStrategy’s share is up by about 89%, while shares of the Grayscale Bitcoin Trust are up by 53%, data from Morningstar showed.

At the same time, since the beginning of 2021, the spot price of bitcoin on Coinbase has risen by 120% since the beginning of 2021, from USD 28,870 on January 1 to 63,641 as of press time (13:02 UTC) on Friday.

Institutional investors, who often can’t or don’t want to hold bitcoin directly, are instead looking to gain bitcoin exposure via BTC-related companies or other investment vehicles. 

MSTR price chart this week:

And now, the focus of market participants appeared to be shifting away from MicroStrategy, which holds about BTC 114,042 (USD 7bn) on its balance sheet, and over to ProShares’ new bitcoin ETF with the ticker BITO. Moreover, new players are also entering the bitcoin ETF market in the US.

However, as pointed out by Barry Silbert, CEO of Grayscale’s parent company Digital Currency Group, GBTC has outperformed BITO since the ETF went live.

At the same time, the price of GBTC still trades at a significant discount to the spot price of bitcoin.  According to data from YCharts, the discount on GBTC is now close to 19% relative to the net asset value (NAV) of the trust, which is close to its lowest levels ever. 

Worth noting is also that GBTC has traditionally traded at a premium to the spot price of bitcoin, helped by the fact that there were few other alternatives available for institutions that wanted exposure to bitcoin.

With the launch of the first bitcoin ETFs, however, this has now changed, and the trust has moved from a premium of 17% at the beginning of the year to a discount of 19% today. 

Premium or discount to GBTC’s NAV. Source: YCharts

Following the approval of several bitcoin futures-backed ETFs by the US Securities and Exchange Commission (SEC), Grayscale has said that it is applying to the regulator to have its trust converted into an ETF. Noteworthy, however, is that Grayscale says it is applying for a “physically” backed spot ETF, which the SEC has not yet given any indication that it is prepared to approve.
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Learn more: 
- First Bitcoin ETF in Immediate Danger of Hitting Cap on Contracts Held 
- Here's What You Need to Know About the Bitcoin Futures ETF

- Grayscale Officially Begins Bitcoin ETF Journey
- Following the First Bitcoin ETF, Ethereum Might be Next