Grayscale's GBTC and ETHE premium rates have surged significantly, are institutions bottom fishing?

The significant discount issue of Grayscale's GBTC and ETHE has been greatly alleviated, returning to high levels seen in the past two months. Is this due to institutional investors buying the dip, or is there another reason behind it?

Grayscale Returns to Glory?

After a significant price pullback in the cryptocurrency market last week, the market plunged into an atmosphere of extreme panic. However, with the market price of cryptocurrencies seemingly reaching the buying level of institutional investors after a pullback of over 50% from the highs, the premium rates of Grayscale's cryptocurrency trust products GBTC and ETHE have risen to their highest levels in two months. According to data from yCharts, the premium rate of ETHE has surged from a low of -11.3% to 11.39%.

At the same time, the premium rate of GBTC has also rebounded from -18.2% to -3.86%. This is the first time it has returned to this level since the last week of March. Investors who bought during the discount period now have higher potential returns than those who bought the spot outright.

The discount issue occurred for the first time this year and has been a problem that Grayscale has struggled to resolve. According to previous reports, Grayscale has indicated on its official Medium account that it intends to convert the closed-end fund GBTC into an open-end fund Bitcoin ETF to address this issue. In fact, Grayscale has emphasized that this has always been Grayscale's "ultimate goal."

Apart from the factors related to the price itself, the rebound of the premium rate may also be partly attributed to the latest ETF submitted to the U.S. Securities and Exchange Commission (SEC) by the asset management company Simplify. The latest ETF they submitted is called the "Simplify US Equity PLUS GBTC ETF," which will allocate 85% to 90% of its funds to invest in U.S. stocks and the remaining 10% to 15% to purchase GBTC as an alternative investment to Bitcoin.

If this ETF is successfully approved, in addition to alleviating the discount problem of GBTC, the additional buying pressure on GBTC will also lead to the flow of Bitcoin spot into the GBTC trading market, potentially rekindling the Bitcoin bull market driven by GBTC earlier this year.