Institutions poured into the Bitcoin market at $19,000, and the GBTC premium hit a 6-month high (www.blockcast.cc)

Grayscale Bitcoin Trust is an institutional tool that can be traded in the US through the over-the-counter market. Qualified investors and institutional investors usually use this trust fund to indirectly invest in BTC through their brokerage accounts.

Why is the premium of Grayscale Bitcoin Trust rising?

Due to the lack of Bitcoin exchange-traded funds (ETF), Grayscale Bitcoin Trust is the preferred tool for institutions to invest in BTC in the United States.

Other markets, such as Canada, already have a Bitcoin ETF that investors can use to invest in BTC. In the absence of ETFs, American institutions will turn to other tools, such as Grayscale Bitcoin Trust.

Each share of the trust fund represents 0.00095346 BTC. Therefore, buying a share of Grayscale Bitcoin Trust Fund is equivalent to buying 0.095% BTC.

As of December 3, the transaction price of GBTC in the entire retail market and spot market was $23.39. The transaction price of Bitcoin is approximately US$19,250, so 0.095% of 1 BTC should be worth approximately US$17.33. This means that GBTC is about 35% more expensive than Bitcoin in the spot market.

On December 3, after the US market closed, the price of Bitcoin rose from $19,000 to $19,250. If this difference is deducted, the current premium of GBTC is about 25% to 30%. It is worth noting that this is the highest level since June, when the BTC market price was about $9,600 before it surged.

However, Grayscale itself does not charge a premium. When the premium rises, it means that more institutions and accredited investors accumulate BTC through GBTC.

Although the current premium is rising, it is still relatively low compared to 2017. This shows that Bitcoin’s rebound still has a lot of room for operation. When the premium of GBTC rises, it usually means that the trend of BTC is bullish and investors’ overall preference for BTC increases.

As a result, the number of Bitcoin owned by Grayscale has increased significantly in recent months. According to its latest report, Grayscale currently owns 10.19 billion US dollars in BTC. More importantly, Grayscale bought twice as many bitcoins as its output in November.

The total amount of #BTC purchased by Grayscale Bitcoin Trust in November 2020 is close to twice the output at that time. $BTC——Coin98 Analytics (Coin98Analytics) December 3, 2020

Institutions are driving this round of Bitcoin rally

In addition to Grayscale’s continuous hoarding of Bitcoin, Travis Kling, Ikigai’s fund manager, found that the past intraday price surge of BTC is similar to the entry of new institutions.

Kling cites a chart to indicate when major institutions-such as JPMorgan Chase, Citibank, Blackstone Group, and Guggenheim Fund-have made positive comments on BTC, and since then BTC prices seem to have more Upside. On December 1, he said:

“I call this picture the’traditional industry shock’. We have been talking about the’herd effect’. The’herd effect’ needs professional risk cover. That is. They are not early adopters, but they have deep strength. High capital stickiness. #Bitcoin has just begun.”

Unlike previous bull market cycles, institutions are currently more actively participating in this round of Bitcoin’s rise. The conflict between institutional accumulation of BTC and whale selling may further contribute to extreme market volatility.

In the past few days, after Bitcoin failed its test of $20,000, it experienced crazy price fluctuations within a few hours. As previously reported by Cointelegraph, this has also led to analysts’ differing views on the next move of BTC.

At the same time, multiple indicators show that Bitcoin may soon exceed $20,000.