Imagine that you come across a collectible you want. You’ve done the math, and you know it’s only worth a specific amount, yet the seller wants double or triple that price. Would you take it? Do you want this collectible enough? When it comes to bitcoin, people are allegedly so desperate to get their hands on the currency that they’re suddenly willing to pay just about anything to add it to their portfolios.
Bitcoin Premiums Are Through the Roof
Bitcoin, the world’s number one cryptocurrency by market cap, has been trading for more than $23,000 for the past several days. The currency attained a new all-time high early last week and has been on a steady roll for some time. It is being pushed as a store of value and as a hedge tool in recent days, with many analysts claiming it can potentially keep one’s money safe during times of economic strife.
This really appears to be making its way into people’s subconscious minds, as most bitcoin traders are suddenly willing to pay ridiculously high prices for the currency. Companies such as the Grayscale Bitcoin Trust, for example, are charging premiums as high as 34 percent on new bitcoin units, and yet this hasn’t stopped the company from garnering business.
The fact is that there is an incredible amount of FOMO – fear of missing out – spreading throughout the financial space. Several people now see anything that’s crypto related as an item or product they simply cannot do without. Furthermore, purchasing through brokerage firms such as Grayscale give people a chance to invest in bitcoin without being exposed to heavy amounts of risk. Thus, they are suddenly willing to pay these ludicrously high fees and prices to obtain bitcoin.
James Seyffart – a Bloomberg Intelligence ETF analyst – claims in a recent interview:
The answer isn’t as simple as ‘does it make sense to pay for that?’ in a vacuum. It makes absolutely no sense to pay that premium, but I think some level of premium is justified, and if you want access to bitcoin, there really aren’t better options.
Overall, bitcoin has surged by more than 200 percent since the beginning of the year, while companies such as Grayscale have seen the assets they manage grow by approximately 40 percent.
Nate Geraci – president of the ETF Store – believes that things are still too sloppy when it comes to BTC trading. People’s willingness to pay these kinds of premiums suggests a huge burst in bitcoin and crypto demand, and he thinks that government agencies such as the SEC that continually deny bitcoin exchange-traded fund (ETF) applications are making a huge mistake.
Lighten Up on Crypto Products!
It’s absolutely mind-boggling that regulators allow retail investors to access these [crypto] products, but won’t allow a bitcoin ETF, which would easily solve the premium issue.