Grayscale Bitcoin Cash, Litecoin Trusts are trading at massive premiums

For some retail investors, Grayscale's publicly traded trusts are the only way to get exposure to cryptocurrencies, says Arcane Research.

3 min read

Aug 20, 2020

Early investors in the assets locked up in the Grayscale trusts for Litecoin and Bitcoin Cash are making immense profits just two days after the trusts started trading publicly.

The Grayscale Litecoin Trust is trading at a premium of 753%, according to data produced by Arcane Research, since its Monday launch. The Grayscale Bitcoin Cash Trust, which launched at the same time, is trading at a premium of 351%.

The Trusts, which opened in April 2018, solicited accredited investors (i.e. very rich), who so far have forked up $29.2 million for the Bitcoin Cash Trust and $19.5 million for the Litecoin Trust. Grayscales handles the paperwork and security.

Then, on Monday, Grayscale made these trusts publicly tradable. This meant that the underlying assets in the trusts would be traded like stocks. This allows buyers to invest in cryptocurrency, in this case Litecoin and Bitcoin Cash, without actually having to go through the trouble of purchasing the actual coins from an exchange and holding those funds themselves.

But why would the shares trade at a premium if the shares represent the underlying cryptocurrency?

According to Arcane Research, one of the main reasons is that trading these funds is the only way American retail investors (i.e. regular Joe Schmoes) can invest in cryptocurrencies through their 401Ks.

The high premiums for the Litecoin and Bitcoin Cash Trusts are shared with other cryptocurrencies. Currently, the Ethereum Trust is trading at a 93% premium, and in early June traded at a 804% premium, according to Arcane. The Bitcoin Trust is currently trading for a 23% premium, it found.

“The premiums show that the public demand for crypto exposure is high, and that the market is ripe for an ETF,” said Arcane.

An ETF, or exchange-traded fund, is a financial product that lets people buy shares in indexes that track baskets of assets. The SEC has several times rejected proposals for a Bitcoin ETF on the grounds that the crypto and Bitcoin market is still rife with manipulation.

“There are, in fact, ways to work with regulators on the asset class within existing frameworks, but they’re just not ready to approve an ETF yet,” Grayscale’s managing director, Michael Sonnenshein said in an interview last month.

Get crypto news straight to your inbox--

sign up for the Decrypt Daily below. (It’s free).

Get Email!

United States of Bitcoin? These States Are Considering BTC Reserves

Donald Trump and his political allies are plugging away at plans to stockpile Bitcoin at a national level in the U.S. Treasury. And now, with the asset’s price repeatedly soaring to new peaks since Election Day, some U.S. states are following suit. So far, three states are fielding proposals to establish strategic Bitcoin reserves, while digital asset advocates are calling for other local governments to do the same. Bitcoin Strategic Reserve Is Now on the Table—Here's How It Could Work Here'...

AI Won’t Tell You How to Build a Bomb—Unless You Say It’s a 'b0mB'

Remember when we thought AI security was all about sophisticated cyber-defenses and complex neural architectures? Well, Anthropic's latest research shows how today’s advanced AI hacking techniques can be executed by a child in kindergarten. Anthropic—which likes to rattle AI doorknobs to find vulnerabilities to later be able to counter them—found a hole it calls a “Best-of-N (BoN)” jailbreak. It works by creating variations of forbidden queries that technically mean the same thing, but are expre...

Elon Musk and Dogecoin: How the Billionaire Became the 'Dogefather'

As Dogecoin makes a comeback off the back of Bitcoin’s surge, some may be pondering: Where did the asset come from? What’s it for? And what’s Tesla CEO Elon Musk got to do with it? The original meme coin’s boom largely has the world’s richest man to thank. Musk’s obsession with shitposting helped boost the coin to a top 10 cryptocurrency. It’s been a wacky ride over the past few years, culminating in Musk's appointment to co-lead a government agency called D.O.G.E.—yes, really. But we'll explai...

News

Courses

Deep Dives

Coins

Videos