Morgan Stanley increases GBTC investment, but cheaper ETFs could compete

    01 Dec 2021

    Morgan Stanley continues to increase its exposure to Bitcoin and has bought a considerable amount of GBTC shares for totals of about $303 million. However, the $36 billion trust feels the push from cheaper ETFs. The FT found GBTC trades at a 15% discount on the value of its underlying assets.

    Banking giant Morgan Stanley is significantly increasing its holdings of the digital currency investment product Grayscale Bitcoin Trust (GBTC).

    Citing information from Morgan Stanley’s filings with the US Securities and Exchange Commission (SEC), market analyst MacroScope reports that the financial giant is ramping up shares of three of its funds with the largest GBTC holdings.

    The bank’s Global Opportunity Portfolio, which held 919,805 shares back on June 30th, now has 1,463,714 shares as of September 30th. GBTC gives institutional investors exposure to Bitcoin (BTC), and Grayscale has $36.6 billion in assets under management by now.

    The Insight Fund also sees an increase in GBTC holdings from 928,051 to 1,520,549 shares. The Morgan Stanley Institutional Fund’s Growth Portfolio has the highest increase in investment, from 2,130,153 shares in the previous quarter to 3,642,118 at the end of the third quarter.

    At the time of publication, the price of GBTC is $45.72, making the investment bank’s exposure to Bitcoin across these three funds roughly $303 million with 6,626,381 shares as of September 30. However, since then, the BTC price upped from $50,000 to an all-time high price of $69,000 before sliding back to the $56,000s.

    However, the North American rollout of Bitcoin exchange-traded funds (ETFs) appears to have tipped the world’s largest crypto fund into a seemingly permanent discount to its net asset value (NAV). The GBTC currently trades 15% below the value of its underlying assets, The Financial Times reported.

    It had traded at a substantial premium to NAV for much of its existence, but it stumbled to a sharp discount after the emergence of the first North American Bitcoin ETF in Canada in February.

    The flip from premium to discount has hit investors in the pocket. While GBTC’s share price rose 42% in the first 10 months of this year, its NAV jumped 92% and the price of Bitcoin 95%, The FT said, citing Morningstar. Moreover, in the 12 months to the end of October, while Bitcoin surged 340%, GBTC’s share price was up 220%, Morningstar found.

    According to Bobby Blue, senior manager research analyst at Morningstar, some 47 funds, including the $5.5 billion Ark Next Generation Internet ETF, separately managed accounts and model portfolios, held GBTC as of September, making it the most widely held crypto-related product.

    “I think it’s a problem [for GBTC],” said Blue. “Competing products, some with better fee structures, some with better ways of tracking Bitcoin, have come to the market, and that will pose a challenge to them to narrow the discount.”

    Morgan Stanley also doubled the number of its GBTC shares earlier this year. The firm’s Europe Opportunity Fund saw a 105% increase in the number of GBTC shares from April to July.

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