The crypto market is suffering from a “fundamental mispricing” at the moment, Jonah Van Bourg says.
In traditional finance, more than enough capital exists to “pre-hedge pretty much any type of announcement or anticipated information that’s widely known,” but this is not the case in crypto, according to Van Bourg.
On a recent 1000X podcast (Spotify/Apple), Cumberland’s global head of trading spoke to Avi Felman, the head of digital asset trading at GoldenTree, about the potential value of Grayscale’s GBTC compared to its current price.
“The best trade in crypto is long GBTC,” he says.
But, he admits, it all depends on hopes for the SEC to approve a spot bitcoin ETF, which isn’t fully priced-in yet, he says.
“There just isn’t enough money that can get into crypto to pre-position for what a BlackRock ETF approval would bring in.”
Van Bourg says that buying bitcoin now — spot or GBTC — enables anybody to “get ahead of a potential BlackRock ETF approval.”
The reason why the price of bitcoin (BTC) “isn’t up in a probabilistically weighted way already,” Van Bourg says, is because “it’s hard for capital to get into crypto right now.”
Traditional finance struggles to attain direct exposure to crypto on a larger scale because of “restricted pathways,” he says. “So I think GBTC is the best trade.”
Felman agrees, noting that GBTC is among his current “favorite trades in the world.”
Grayscale-issued GBTC shares allow traditional investors to gain indirect exposure to bitcoin and avoid the hassles of physical custody. Rather than personally holding digital assets in a crypto wallet, traders can leave the daunting responsibility to Grayscale.
Since the Grayscale Bitcoin Trust does not yet enjoy status as an ETF, GBTC currently trades well below bitcoin’s market value as it can not be directly redeemed for the underlying bitcoin asset.
The cynical take
An SEC approval of BlackRock’s spot bitcoin ETF could spark a series of similar approvals, including Grayscale’s proposal. Such a change would remedy the share-to-bitcoin imbalance and allow for 1:1 redemption.
But Felman has a “cynical take” on this potential outcome. “I don’t think the ETF drives truly meaningful flows.”
A significant amount of flow into bitcoin could be offset by GBTC owners who finally redeem their shares and exit bitcoin altogether, he says. “There are funds right now that own GBTC outright and will, when approved, drain GBTC of their Bitcoin and get out of the trade.”
“Yes, there are a lot that own GBTC in a market neutral fashion, but there are a lot that own it outright, basically willing to take the price risk of bitcoin,” Felman says. “And when that gap closes, they’re out.”
All of this conjecture depends on a spot bitcoin approval, Felman admits. “We’re talking as if the ETF is definitely going to get approved.”
“But I think we’re at an inflection point where it becomes an institutionalized asset class and it becomes something that is just not going away.”
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Source: https://blockworks.co/news/long-gbtc-van-bourg-says