Bitcoin trading above $6000 in the US!

Forbes reported today that according the Bitcoin Price Index (BPI) shown on Coindesk Bitcoin surpassed the $4000 mark at 16:55 UTC. (Yes I know I said $6000 in the title, I will come on to that).
Unfortunately this major milestone was unnoticed by many investors as it was not reached on most or any of the large exchanges.
On Poloniex for example the price reached a maximum of $3952.

On Bittrex another major crypto exchange the price went up to 'just' $3943.

Even according to Worldcoinindex or Coinmarketcap the price didn't reach higher than $3964 and $3949 respectively. So it might have been an unofficial milestone so to speak.

In any case compared to what I am about to say, this is ancient history, as Bitcoin was already trading in the US above $4000 two weeks ago. Back then I wrote a blog post about it as well.
As explained in the previous article, bitcoin can be traded in the US via Exchange Traded Funds (ETFs) or also called trackers. I used to trade ETFs a while back as well and basically they are designed to track a particular Index or Future. Reasons for creating trackers are many, but one of the main reasons is that this allows people to invest in items they would otherwise not be able to (regulations, geography, etc). So too this is the case with Bitcoin for certain US investors. As regulation prohibits these investors to invest in Bitcoin directly, they have to make do with ETFs on Bitcoin. This ETF is called GBTC and well explained on Wikipedia:

"Established in 2013, Grayscale is a digital currency investing firm. It manages the Bitcoin Investment Trust (BIT), provides titled, auditable bitcoin exposure through a traditional investment vehicle. BIT shares are the first publicly quoted securities solely invested in, and deriving value from, the price of bitcoin. The Trust trades under symbol: GBTC on the OTCQX market, and is only available to accredited investors."

So now we know what the ETF is. Let's get to the explanation of that insane price you mentioned in the title!

Alright, let me elaborate:

• First off, the price of one 1 ETF is not the same as the price to 1 BTC, but rather 0.1 BTC. As far as the writer is aware, this has been done to make the ETF more trade-able for smaller investors as you cannot trade fractions of an ETF (yet).
• Second, the ETF is trading at a premium due to the limited amount of ETF shares that has been issued. Further placement was halted in January 2017 while demand was increasing (the reasons for the higher demand were detailed in my previous article on this subject).
• Third, there is no way to arbitrage (buy a product with same the exact characteristics, e.g Bitcoin, for a lower price than selling a different product that is created to replicate these economic characteristics,e.g. GBTC) as it is impossible to borrow the ETF and it is not possible to short sell the ETF.

This has allowed a constant premium to exist of GBTC over BTC for about 50%!

As can be seen in the graph below, GBTC is is trading currently trading at an equivalent of $6165 and has reached a high today of $6245! Remember 1 GBTC equals 0.1 BTC in economic terms.

Once the application of additional ETFs is approved by the SEC, which is expected before October 9th 2017, the premium should decrease to less crazy levels.

However till then, this might be a pretty good indicator of what price levels we are heading in the near future.

Stay tuned!

References:
https://steemit.com/bitcoin/@attalis/bitcoin-trading-above-usd4000-in-stock-market
https://www.forbes.com/sites/cbovaird/2017/08/12/bitcoin-surpasses-4000-reaches-another-milestone/#5a9461ad6a8c
https://en.wikipedia.org/wiki/Digital_Currency_Group
http://www.prnewswire.com/news-releases/grayscale-investments-llc-ceases-private-placement-of-bitcoin-investment-trust-300394141.html
https://seekingalpha.com/article/4097364-bitcoin-investment-trust-events-coming-head
Images:
https://news.bitcoin.com/bitcoin-investment-trust-ipo-october/
https://www.bittrex.com/
https://www.poloniex.com/