According to Coinglass graphical analysis, Grayscale Filecoin Trust was trading at an 89% premium over the market price.
On the 6th of January 2023, the value of the Grayscale FIL holdings was at $3.1 while the marker value was $5.9. This set the premium on the FIL investment at 89.1%.
The Grayscale Filecoin Trust allows investors to passively invest in the FIL asset without risking unnecessary exposure to the asset. This is done in the form of security that bypasses the need for the investor to buy, store and secure the Filecoin actively.
Grayscale Trust handles the stress above and safeguards the assets in cold storage with Coinbase Custody Trust. This provides a tax-efficient means for investors to control exposure to numerous Cryptocurrencies including BTC. Which is the appeal for high-value traders.
And like all trading mechanisms, the major issue Is the same thing that makes it appealing. The fluctuation of demand and price determines if the share or holding is trading at a premium or at a discount.
The premium or discount is a reference to the difference between the share value of the holdings of the trust against the market price of the holding or asset. Thus, when the market price is higher than the share value of the holding, the difference is called a premium, and if it’s lower than the share value of the holding it’s called a discount.
Added to the inherent risks associated with investing or trading in assets, to begin with, the Grayscale funds have a history of being pricing arbitrage tools for major investors.
On December 18th, 2020, Grayscale’s Bitcoin Cash fund closed at $55.25 per share while the underlying value of the Bitcoin Cash was $2.91, indicating a 1,800% premium. Investors who bought the fund on that date are down a massive 98.3% with a share value of $0.9.
That’s why traders and investors in Grayscale’s Filecoin Trust, who did not properly research their purchase, can easily get left holding the bag when lockups expire.
Lastly, because premiums and discounts are unpredictable, little moves in the underlying asset can cause big moves in the trust, and big moves in the asset may lead to little or no movement in the share value. Thus similar to all trades and investments, the 89% premium can be a positive indicator of the market or a negative one.