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It’s like the GBTC premium, but in Chinese silver

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It’s like the GBTC premium, but in Chinese silver

Amid a speculative frenzy in silver, the Shenzen-traded UBS SDIC Silver Futures Fund LOF has repeatedly halted trading, warned of an “unsustainable premium” in its share price, and paused primary-market subscriptions to limit cash inflows.

It has also warned that if the premium doesn’t effectively retreat by February 2, the State Development Investment Corporation (SDIC) will apply for additional trading suspensions.

Year to date, the fund is up 133%. Silver, in contrast, has rallied a more modest but still impressive 52% over the same time period.

It’s the GBTC Premium all over again

Before the SEC approved the conversion of Barry Silbert’s Grayscale Bitcoin Trust (GBTC) from an over-the-counter trust into an ETF, it only loosely tracked the price of bitcoin (BTC).

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Its brief yet famous “GBTC Premium” occurred when the fund traded for more than double the value of the corresponding BTC.

Indeed, during periods of bullish demand for BTC price exposure via a severely limited set of securities trading on US exchanges, the price of GBTC exceeded 130% the value of its BTC holdings on June 1, 2017 and again on September 1, 2017.

Incredibly, retail investors bid a premium for GBTC for months, allowing accredited investors to enjoy a nearly riskless arbitrage by giving Grayscale BTC directly and waiting a discreet interval of a few weeks to receive GBTC shares at its premium-free net asset value (NAV).

Indeed, the GBTC premium persisted from August 2015 through late February 2021. At that time, investors doubted Silbert’s ability to convince outgoing SEC Chairman Jay Clayton and incoming Chairman Gary Gensler to approve GBTC’s conversion into a spot ETF.

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Eventually, an August 29, 2023 decision from the US Court of Appeals for the DC Circuit ruled in Grayscale’s favor that the SEC’s denial of its trust conversion was arbitrary and capricious. 

After trading at a substantial discount-to-NAV since late February 2021 — even as low as half the value of its NAV by December 2022 — its discount slowly narrowed and eventually neared parity with its NAV as its ETF conversion date arrived.

Speculators turn ravenous for sole Chinese silver fund

The UBS SDIC Silver Futures Fund LOF is the only silver fund trading on a major Chinese exchange, and its premium has been rising all year.

It reached a staggering 60% today and had the exchange not halted trading to limit its price, it might have even traded higher.

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Read more: Crypto traders finally get gold — at all-time highs

Of course, long-term precious metal investors will never receive compensation from the SDIC for this premium above the fund’s holdings of silver futures contracts.

The only way to make money after buying at a premium is to hope that other investors will pay an even more lavish and irrational premium in the future.

Paradoxically, this game of greater fools has worked over the last few weeks. Whether and how long it will persist, however, is a matter of frenzied debate in Shenzen before the fund’s next trading un-halt.

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Crypto World

Solana (SOL) Plunges Below $100, Bitcoin (BTC) Recovers From 15-Month Low: Market Watch

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BTCUSD Feb 4. Source: TradingView


Meanwhile, HASH and HYPE have declined the most over the past 24 hours after charting impressive gains lately.

Bitcoin’s adverse price actions as of late worsened yesterday when the asset tumbled to its lowest positions since early November 2024 at $73,000 before recovering by a few grand.

Most altcoins followed suit with enhanced volatility, but some, such as SOL, HYPE, and CC, have been hit harder than others.

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BTC’s Latest Rollercoaster

It was just a week ago when the primary cryptocurrency challenged the $90,000 resistance ahead of the first FOMC meeting for the year. After it became official that the Fed won’t cut the rates again, BTC remained sluggish at first but started to decline in the following hours.

The escalating tension in the Middle East was also blamed for another crash that took place on Thursday when bitcoin plunged to $81,000. It bounced off to $84,000 on Friday but tumbled once again on Saturday, this time to under $75,000. Another recovery attempt followed on Monday, only to be rejected at $79,000.

Tuesday brought the latest crash, this time to a 15-month low of $73,000. It has rebounded since then to just over $76,000, but it’s still 3% down on the day. Moreover, it has lost 14% of its value weekly and a whopping 18% monthly.

Its market capitalization has plummeted to $1.525 trillion on CG, while its dominance over the alts has declined to 57.3%.

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BTCUSD Feb 4. Source: TradingView
BTCUSD Feb 4. Source: TradingView

SOL Below $100

Most larger-cap altcoins have felt the consequences of the violent market crash lately. Ethereum went from over $3,000 to $2,100 in the span of a week, before bouncing to $2,280 as of now. BNB is down to $760, while SOL has plummeted to under $100 after a 7% daily decline.

Even the recent high-flyer HYPE has retraced hard daily. The token is down by 11% to $33. CC and ZEC are also deep in the red, while XMR has gained the most from the larger caps.

The cumulative market cap of all crypto assets has seen more than $70 billion erased in a day and is down to $2.65 trillion on CG.

Cryptocurrency Market Overview Feb 4. Source: QuantifyCrypto
Cryptocurrency Market Overview Feb 4. Source: QuantifyCrypto

 

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Pumpfun Unveils Investment Arm and $3 Million Hackathon

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Pumpfun Unveils Investment Arm and $3 Million Hackathon


PUMP rallied as much as 10% but erased its gains as crypto markets dipped.

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Spot Bitcoin ETF AUM Hits Lowest Level Since April 2025

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Spot Bitcoin ETF AUM Hits Lowest Level Since April 2025

Assets in spot Bitcoin (BTC) ETFs slipped below $100 billion on Tuesday following a fresh $272 million in outflows.

According to data from SoSoValue, the move marked the first time spot Bitcoin ETF assets under management have fallen below that level since April 2025, after peaking at about $168 billion in October

The drop came amid a broader crypto market sell-off, with Bitcoin sliding below $74,000 on Tuesday. The global cryptocurrency market capitalization fell from $3.11 trillion to $2.64 trillion over the past week, according to CoinGecko.

Altcoin funds secure modest inflows

The latest outflows from spot Bitcoin ETFs followed a brief rebound in flows on Monday, when the products attracted $562 million in net inflows.

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Still, Bitcoin funds resumed losses on Tuesday, pushing year-to-date outflows to almost $1.3 billion, coming in line with ongoing market volatility.

Spot Bitcoin ETF flows since Jan. 26, 2026. Source: SoSoValue

By contrast, ETFs tracking altcoins such as Ether (ETH), XRP (XRP) and Solana (SOL) recorded modest inflows of $14 million, $19.6 million and $1.2 million, respectively.

Is institutional adoption moving beyond ETFs?

The ongoing sell-off in Bitcoin ETFs comes as BTC trades below the ETF creation cost basis of $84,000, suggesting new ETF shares are being issued at a loss and placing pressure on fund flows.

Market observers say that the slump is unlikely to trigger further mass sell-offs in ETFs.

“My guess is vast majority of assets in spot BTC ETFs stay put regardless,” ETF analyst Nate Geraci wrote on X on Monday.

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Source: Nate Geraci

Thomas Restout, CEO of institutional liquidity provider B2C2, echoed the sentiment, noting that institutional ETF investors are generally resilient. Still, he hinted that a shift toward onchain trading may be underway.

Related: VistaShares launches Treasury ETF with options-based Bitcoin exposure

“The benefit of institutions coming in and buying ETFs is they’re far more resilient. They will sit on their views and positions for longer,” Restout said in a Rulematch Spot On podcast on Monday.

“I think the next level of transformation is institutions actually trading crypto, rather than just using securitized ETFs. We’re expecting the next wave of institutions to be the ones trading the underlying assets directly,” he noted.