The Bitcoin Investment Trust (GBTC), an investment vehicle operated by Grayscale that lets accredited and institutional investors trade bitcoin, is still showing a high premium at 24%.
Each share of GBTC represents about one thousandth of one bitcoin or 0.00097033 BTC. Since GBTC is currently priced at $8.79, that values bitcoin at $8,966. On major spot and margin trading platforms, the bitcoin price is hovering at $7,500.
Why Bitcoin Investment Trust premium shows institutional demand
Due to various restrictions, most accredited and institutional investors are unable to invest in bitcoin and other major cryptocurrencies through crypto exchanges. They require strictly regulated platforms that are overseen by financial regulators.
Investors pay a premium to purchase bitcoin through the Bitcoin Investment Trust because the GBTC offers certain safeguards and eliminates regulatory risks which most existing crypto exchanges do not have.
Also, some investors are required to invest through the stock market or over-the-counter (OTC) securities platforms, creating a strong market for GBTC.
According to Grayscale, net assets under management of the company, which mainly comes from the Bitcoin Investment Trust, has risen back to $2 billion.
12/13/19 UPDATE: Holdings per share, net assets under management and digital assets per share for our investment products.
Total AUM: $2.0 billion$BTC $BCH $ETH $ETC $ZEN $LTC $XLM $XRP $ZEC pic.twitter.com/9oW887bklj
— Grayscale (@GrayscaleInvest) December 13, 2019
The relatively high premium on GBTC and the gradual increase in the AUM of Grayscale indicate that institutional demand for bitcoin is consistently on the rise.
Will it help sentiment improve in 2020?
Arguably, bitcoin is currently facing a bear trend. Its price is up nearly two-fold since January but deal value, media coverage, and exchange volume, among other factors, show that the market is stagnant.
As seen in late 2018, when the bitcoin price sees a sharp pullback into the new year, the negative sentiment is often carried onto the following first quarter.
Coming down from its yearly high at $13,900 in a 50 percent correction, BTC is still at risk of seeing a decline in momentum throughout the first few months of 2020.
But, if fundamentals such as hashrate, transaction value in USD, and institutional demand continue to remain in tact, it could prevent a major correction for BTC.