Grayscale’s Zcash ETF Bid Triggers ‘GBTC 2.0’ Debate: Crash Or Pump Ahead?

Delphi Digital researcher Simon Shockey is arguing that the true story in Zcash is not simply its value – regardless of ZEC having probably the most eye-popping rallies of this cycle in current months. “The most attention-grabbing factor about ZEC at this time just isn’t the value,” he wrote on X. “It’s the truth that a GBTC-style low cost dislocation simply appeared round ZCSH.”

For Shockey, the Zcash belief setup solely is smart when seen by the lens of what occurred with Grayscale’s Bitcoin product. He reminds readers that “funds had been constructed, and later blown up, on two completely different GBTC trades.” The first was the premium arbitrage, the place Grayscale allowed accredited buyers to subscribe at NAV with a six-month lock whereas GBTC traded at a “~30–40%” premium in public markets.

Will Zcash Follow The GBTC Playbook?

The playbook, he writes, grew to become nearly mechanical: “subscribe at NAV, lock for six months, hedge BTC publicity with CME shorts, promote GBTC at a premium, pocket the unfold and lever it.” It was so extensively adopted that “each TradFi household workplace, hedge fund vacationer, and crypto-native desk was working it. It grew to become the commerce. Until, effectively, it didn’t…”

In February 2021, after years of buying and selling wealthy to NAV, GBTC flipped to a discount. Anyone mid-lockup was now lengthy an over-priced wrapper, paying to take care of a hedge and watching the low cost widen to “-30%, -40%, even -45%.” Shockey calls that dislocation “profession/cycle-ending nearly in a single day,” and notes that it helped detonate gamers like 3AC, BlockFi, Genesis and DCG.

But he stresses that GBTC’s story had a second act: as soon as the low cost was entrenched, “a distinct commerce emerged: purchase GBTC at a reduction, look forward to regulatory readability or ETF approval, redeem at NAV, seize the collapse within the low cost.” Value-oriented funds “had been early and underwater for some time. But they had been in the end proper. The low cost evaporated as ETF approval grew to become inevitable.”

Shockey’s competition is {that a} structurally comparable section might now be opening round Grayscale’s Zcash belief. “This morning Grayscale filed to transform ZCSH, their Zcash belief, into an ETP,” he writes. “That submitting instantly creates the early define of a GBTC-style low cost commerce.”

He highlights that ZCSH not too long ago traded round 33.50 {dollars} per share, despite the fact that “yesterday’s belief knowledge, with a decrease ZEC value, confirmed NAV round forty-one {dollars} per share.” By his math that’s “nonetheless near a 20 p.c low cost. Every ZCSH share is priced materially under the ZEC it represents.” With an implied 0.0817 ZEC per share, “you might be successfully getting ZEC publicity at ~$410 per ZEC when spot is effectively above that.”

The key structural shift is the proposed transfer from a closed belief to an exchange-traded product with redemptions. “The present belief construction doesn’t permit redemptions,” Shockey notes. “The proposed ETP would, with one-to-one withdrawals of the particular ZEC held.” If regulators log out, “the low cost ought to tighten and ZCSH ought to transfer towards NAV. This is strictly what occurred with GBTC as ETF approval grew to become extra sensible.” He is cautious so as to add: “Not assured. Not the identical commerce. But structurally very comparable.”

On the money-making angle, Shockey is specific. “The low cost closing is the cleanest angle. Buying ZCSH at a 20 p.c low cost and promoting after convergence is the purest model of the commerce.” Beyond that, “there may be optionality if ZEC rerates through the approval window. If the privacy-oriented store-of-value narrative strengthens, ZEC can rise whereas the low cost closes. That creates a second leg of upside that GBTC didn’t supply till very late.”

He argues {that a} ZEC ETP “may unlock new demand,” since “most funds/buyers can’t maintain ZEC straight as a consequence of custody and mandate points. An ETP solves that. New swimming pools of capital usually tighten reductions by themselves.”

Narrative and political tailwinds, in his view, are actual. “Bitcoin’s lack of privateness is again in focus. The quantum-risk dialogue is getting louder.” He factors to mainstream airtime, together with feedback from VanEck’s CEO about Bitcoin’s shortcomings and ZEC as a possible hedge, as a sign that the story has escaped pure crypto-Twitter.

His closing abstract captures the uneven, time-bounded nature of the wager: “If markets hold leaning towards the concept ZEC is absorbing the function Bitcoin stepped away from, then ZCSH turns into the cleanest car to specific that view. You get ZEC publicity in public markets, which may turn into a significant driver of rerating as flows decide up, plus a built-in twenty p.c low cost that solely exists till the ETP is accredited. ZODL?”

At press time, Zcash traded at $509.84.