Grayscale Litecoin Trust: You Thought You Had Seen It All (OTCMKTS:LTCN)

I recently wrote an article titled “Grayscale Bitcoin Cash Trust: Pure Lunacy.” I thought it would be impossible for the market to be crazier than that in this instance. After all, Grayscale Bitcoin Cash Trust was trading at a full 1,035% premium to its NAV (Net Asset Value), which is set by the Bitcoin Cash it holds.

Enter Grayscale Litecoin Trust (OTCQX:LTCN). Amazingly, the lunacy on LTCN puts the lunacy on BCHG to shame.

Again, these funds’ worth per share is entirely dictated by the amount of cryptocurrency they hold (per share). In this case these funds hold Litecoin (LTC)”>OTCQX:LTCN) and Bitcoin Cash (OTCQX:BCHG). Again, for LTCN, we know precisely the amount of Litecoins it holds per share. We also know precisely at what price Litecoin is trading. Finally, Litecoin is easy to trade.

So how does LTCN look? Here are the facts from the appropriate Grayscale Litecoin Trust webpage:

Source: Grayscale.co

As with the Grayscale Bitcoin Cash Trust, it’s straightforward to calculate how much each LTCN share should be worth. It should be worth the LTC quote x 0.09332222.

We can check LTC’s current price easily at CoinDesk:

Thus, each LTCN share should be worth $83.57 x 0.009332222 = $0.78.

So, where did LTCN last close? $278.

That’s the reason LTCN is even crazier than BCHG. I was amazed when BCHG was trading for 11x its worth. For LTCN that number is 35.6x. When you think you’ve seen it all…

The truth is BCHG is a lot more liquid so a bit crazier in that regard. BCHG actually has bids near its price. LTCN trades very little and doesn’t have bids except for 9% of the current value ($25, which, mind you, is still 3.2x above where it should be and 3x more overvalued than BCHG).

Again, this craziness isn’t hidden by Grayscale:

Only in the current market environment could we ever observe such a thing, LTCN carries a $2.39 billion market capitalization as a result of this craziness. Someone holds those shares and is valuing them at these levels.

Selling Short

Like with BCHG, unfortunately, LTCN is impossible to sell short. Even if it were possible to sell short, it would be dangerous, though. It would only make sense to sell it short with a small position, as something that trades for 32.1x what it should be worth can just as easily trade for 60x or 300x.

Indeed, just recently LTCN was trading at double today’s prices, though again, with very little volume.

However, if you hold LTCN you really should try selling it.

Information On Bitcoin

Right now, as with every other speculative asset, there’s a lot of interest in cryptocurrencies in general and Bitcoin in particular.

A while ago I wrote a long series on Bitcoin which remains very relevant today and can help most people understand Bitcoin better. I’m going to (again) leave links here for that past series:

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.