The Bitcoin Index Fund Could Power These Crypto ETFs

[ad_1]

Amid the crypto winter of 2022 and the collapse of exchange operator FTX, the Grayscale Bitcoin Trust (GBTC) has spent time in the negative spotlight, but with bitcoin’s rebound to start 2023, the benefits could accrue to GBTC.

In fact, some market watchers believe that GBTC has the potential to double by the middle of this year. That’s the forecast issued last week by Pat Tschosik, a senior portfolio strategist at Ned Davis Research.

We recommend GBTC…as a way to play Bitcoin because it has a potential discount to the NAV kicker, which not only means it would go up if Bitcoin goes up, but also closing out its current large 35% discount to NAV, a writes Tschosik in a report.

Assuming the predictions prove accurate, there would likely be tangible benefits for a variety of equity-based crypto-correlated exchange-traded funds, including the Invesco Alerian Galaxy Crypto Economy (SATO) ETF and the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce (BLKC).

BLKC, which turns two in October, has 55 holdings, and that list is dominated by a nearly 15% allocation to GBTC. For its part, SATO has 35 constituents, and GBTC is by far the largest, with a weighting of 14.57% in this ETF. Translation: What is good for GBTC could very well be good for BLKC and SATO.

Ned Davis Research acknowledges that GBTC is not a risk-free bet, noting that the Bitcoin index fund could jump 100% or fall another 33%. However, the research firm also pointed out that the issuer could take steps to reduce the funds’ discount to its net asset value (NAV).

One way for GBTC to close the rebate would be to allow investors to withdraw their investment, Tschosik said. Grayscale does not offer a buyback program for the fund, which means investors can only exit their position by selling their shares to another investor, Jesse Pound reported for CNBC.

Of course, if regulators allowed GBTC to convert to an ETF, the discount on the net asset value issuance would likely be enhanced and bitcoin prices could potentially rise as more investors flock to the fund, which would perhaps benefit BLKC and SATO along the way.

There are currently no ETFs that track spot bitcoin in the United States, and the Securities and Exchange Commission has repeatedly refused to license such products from Grayscale and other companies. Grayscale sued the SEC over the decision to reject its conversion plan, according to CNBC.

vettafi.com is owned by VettaFi, which also owns the index provider for BLKC and SATO. VettaFi is not the sponsor of BLKC and SATO, but the affiliate of VettaFis receives index license fees from the sponsor ETF.

For more news, insights and analysis, visit the Crypto Channel.

Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

[ad_2]