This is very different from my usual analyses, but I still hope you enjoy!
This chart calculates the premium or discount you are paying/receiving when trading GBTC . If you don't understand how such a thing can happen I will explain at the end! For now I will explain how I created such a chart and how you can do it yourself! This can be applied to other bitcoin Trust/Fund. _________________________________________________________________________________________________________________________________________________________________
How it's done
The goal is to get the premium or discount (P/D), For this example we will look at GBTC: 1. To do that we need to divide the price per share by what the share is really worth (in our case the value in bitcoin of the share). This will give us the ratio of the price vs its value. Price per share / Net asset value per share
2. We get the value per share by multiplying how many BTC we get per share by the Bitcoin price. Net asset value per share = BTCUSD*0.00094680 <---- This value can be found on the Fund website
3. We substract 1 out of the ratio to get the value of the (P/D). (P/D) = (Price per share / Net asset value per share)-1
4. To chart this we go to enter a symbol and enter : GBTC /(BTCUSD*0.00094680)-1
Like I said this can be applied to other BTC fund. Say you want it for QBTC: QBTC.U/(BTCUSD*0.00112383)-1
Extra Notes: -BTC per share values change so verify before using mine you could be mislead -I suggest using a line chart, but you can experiment! ________________________________________________________________________________________________________________________________________________________________
How to interpret
1. If the value on the chart >0 the fund is trading at a premium and for values <0 it's trading at a discount. 2. Value are in decimal so if you see a value of -0. 05 the fund is trading at a discount of 5% 3. Values will tend to normalize around the annual fee for the fund(ex: GBTC -> -0.02). 4. After market values will be based on the closing price of the fund, but will continue to fluctuate since Bitcoin is 24H. Wait for the market to be open to get real time premium/discount _______________________________________________________________________________________________________________________________________________________________
How does this happen?
Often when we see a premium or discount we can generally blame it on 3 key factors: Supply and demand , Management team and expectation. While pretty self explanatory if you want to more info I suggest you check out this Investopedia page: investopedia.com/ask/answers...
I hope this helped you and your trading. Thank you for reading!
Charts like these are very useful! I have been using the same formula with a multiplier to get the numbers in percent, for example:
(GBTC/(0.00094690*BTCUSD)-1)*100
Looks like in the past negative or near-zero premiums have been buying opportunities, though at times premium decreases have also predicted a fall in price. Great deals going on right now, if one is in it for the long term and thinks the price is going up!
Mr_Rolie
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@pnaik732 That's very true I thought about the idea of multiplying by 100 but forgot to put it in the notes thank you for letting others know!
And I agree with you lows like this are great buying opportunities! We also have to watch if an even bigger opportunity will come when the US launches it's first Bitcoin ETF
pnaik732
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@Mr_Rolie, indeed! Though fortunately bitcoin watchers at the moment can see that GBTC has been giving up to a 15% discount as of late.... An ETF will be great of course for the price, but at this point who needs an ETF when GBTC is paying you to own it! Not a bad time to at least trade some satoshis and gweis for GBTC/ETHE.
pnaik732
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@pnaik732, ah, one plus for an ETF though might be lower maintenance fees, though that's of course not a big worry when GBTC trades at a discount