August 10, 2022

MicroStrategy Holdings and Grayscale Bitcoin Trust

The following is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive this information and other on-chain bitcoin market analysis straight to your inbox, Subscribe now.

Bitcoin investment vehicles

In our issue last month, GBTC Discount Shrinks, we’ve highlighted the latest status of the Grayscale Bitcoin Trust, an overview of its spot ETF approval process and expected timeline for 2023. At that time, we were seeing a reversal in GBTC discount trading to 23.15% from its low of 30%.

Since then, the discount has fallen further, hitting an all-time low of 34.5% this week. It is likely that this deepening discount is the result of more market sell-offs from risk appetite and the market reaction to the LUNA UST market blowout. Although the failure of LUNA can be seen as strengthening the case for Bitcoin in the long run (the best will survive), this example will certainly be used as firepower for increased government regulation, scrutiny and protection efforts. investors across the industry.

Regardless of the exact reasons for the reduction in the GBTC rebate, the lack of spot bitcoin ETFs in the US continues to affect GBTC holders with a further down performance of 7.63% since the start of the rebate. year against bitcoin.

GBTC shares are trading below prices seen during the 2017 bull run and markets are reassessing the level of risk involved in owning MicroStrategy shares.

GBTC has been trading at a discount to net asset value (NAV) since 2021

GBTC shares are trading below prices seen during the 2017 bull run and markets are reassessing the level of risk involved in owning MicroStrategy shares.

A Closer Look at GBTC Reduction on NAV

GBTC shares are trading below prices seen during the 2017 bull run and markets are reassessing the level of risk involved in owning MicroStrategy shares.

GBTC returned -45.87% compared to -38.24% for BTC during the same period

For funds and individuals looking to gain exposure to bitcoin, GBTC seems like a fantastic buy, equivalent to buying bitcoin at around $21,000 with a 2% annualized management fee. While it’s obvious that GBTC shares trading in secondary markets don’t exhibit any of the sovereign properties of on-chain native bitcoin, if/when the trust converts to an ETF, GBTC shares offer a strong upside over to bitcoin.

Finally, we have one of the most prominent bitcoin exposure vehicles over the past two years, MicroStrategy. According to their earnings presentation earlier this month, the company owns 129,218 bitcoins with an average cost of $30,700. Due to their leveraged debt to buy bitcoin and bitcoin’s 36% year-to-date decline, markets are reassessing the level of risk involved in holding MicroStrategy debt and stock. MicroStrategy is down 61.82% year-to-date, while the value of MicroStrategy’s bitcoin holdings now represents 154% of its entire market capitalization.

GBTC shares are trading below prices seen during the 2017 bull run and markets are reassessing the level of risk involved in owning MicroStrategy shares.

MSTR stock traded -61.82% vs. -35.85% at BTC over the same period

GBTC shares are trading below prices seen during the 2017 bull run and markets are reassessing the level of risk involved in owning MicroStrategy shares.

MSTR’s market capitalization was more strongly impacted than the price of bitcoin

Although buying MSTR today implies strong expected future performance of the bitcoin price, if one is correct with this assumption, MSTR shares would be one of the best bets to make in the medium/long term, since the company is almost non-liquidable. leverage bitcoin’s position and access public capital markets as well as free cash flow and a growing public brand.

Bitcoin Pro magazine subscription button