Litecoin is trading at a 1,800% premium via Grayscale’s LTC trust — But why?


Shares in Grayscale Investments’ Grayscale Litecoin Belief, or LTCN, have been buying and selling at a whopping 1,800% premium over the market charge of their underlying asset, Litecoin (LTC).

$319 per Litecoin? 

This distinction is primarily attributable to retail traders’ incapability to buy shares straight from Grayscale Investments, whose funds are aimed solely at accredited traders.

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LTC holdings per LTCN share (orange) and premium (blue). Supply:

It prices $319 to purchase a share in Grayscale Litecoin Belief. Nevertheless, its LTC holdings per share are at present value simply $16.42. Meaning it is virtually 20 occasions costlier to purchase Litecoin through the belief than common spot exchanges.

LTCN shares have just lately traded for as excessive as $496 in November 2020 — 38% above Litecoin’s highest closing worth in December 2017. Though the premium on Grascale’s Litecoin fund has been drastically minimize over the previous three months, LTCN shares stay an unattractive funding car for retail merchants.

The belief provides publicity to LTC with out traders needing to deal with or custody cryptocurrency. However, its shares can solely be offered by Grayscale Investments to institutional traders.

The weird unfold seems to have been pushed by growing retail demand for Litecoin forward of the Mimblewimble privacy solution rollout, with Grayscale accumulating $258 million value of LTC up to now.

Arbitrage is just not actually an possibility

Grayscale’s Litecoin Belief aggressively ramped up accumulation in February, shopping for at a charge equal to 80% of latest Litecoin being mined through the interval.

Nevertheless, anybody enthusiastic about a possible arbitrage alternative ought to be aware that every one LTCN shares require a one-year holding interval after they’re created. In addition to, the belief requires all traders to be accredited, with a minimal of $25,000 to start out.

America-based funding agency additionally provides trusts for different cryptocurrencies, together with Bitcoin (BTC). The Grayscale Bitcoin Belief (GBTC) is the agency’s largest holding, with over $30 billion in belongings underneath administration.

In current days, the Grayscale Bitcoin Belief traded at a discount to net asset value because the TSX Objective Bitcoin ETF noticed document inflows. A diminished urge for food within the secondary markets creates a possible imbalance, as there isn’t a redemption program for the Grayscale rust funds.

Had there been a method to convert these shares again to their LTC or BTC equal, a market maker would gladly purchase the belief shares at a reduction.

The views and opinions expressed listed below are solely these of the author and don’t essentially mirror the views of Cointelegraph. Each funding and buying and selling transfer includes danger. You must conduct your personal analysis when making a choice.