🔎 [Messari Research] Three more Grayscale products could be available on OTC Markets soon

Amid the continued discussion around the approval of a Bitcoin ($BTC) ETF it is worth noting that two prominent “side-door ETFs” are trading on OTC markets today. The Grayscale Bitcoin Trust ($GBTC) and Grayscale Ethereum Classic Trust ($ETCG) have taken advantage of an SEC Rule 144 exemption which allows them (and their investors) to resell shares to the public, but only after an accredited Regulation D offering, and a one-year holding period. The Bitcoin Trust is the largest Grayscale fund with $768.2 million in assets under management (AUM). Because these products aren't truly exchange traded it makes it difficult or impossible to sell them short, leading to inefficient markets. Currently, GBTC trades at a 17% premium to NAV (the actual value of the underlying assets), which is modest compared to where it was in 2017, and ETCG trades at a massive 85% premium to NAV. Grayscale has used this structure to work within the existing regulatory framework for numerous other assets as well, three of which are eligible for OTC trading now, and three of which will be eligible later this year.

Eligible now (and could already be in the works):

• Grayscale Ethereum ($ETH) Trust ETH: $6.4 million AUM
• Grayscale Zcash ($ZEC) Trust: $7.8 million AUM
• Grayscale Digital Large Cap Fund: $8.4 million AUM (eligible Feb 2)

For initial investors that have been relying on the premium to NAV for enhanced returns, their strategy could be hindered by a delay in OTC listings for products or the launch of a Bitcoin ETF, which may prove more enticing for investors looking to gain exposure to the asset class. Subscribers to our Unqualified Opinions newsletter can get more insights into the situation, including the three funds that may trade later this year. If you aren't subscribed, click here to sign up for daily insights from the Messari team.

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