Ultimate Resource For Grayscale Bitcoin Trust Involvement In The Crypto-Industry (#GotBitcoin)
Digital asset management fund Grayscale Investments’ Bitcoin Trust (GBTC) is up almost 300% on the year, data from Morningstar via the Wall Street Journal (WSJ) reveals. Ultimate Resource For Grayscale Bitcoin Trust Involvement In The Crypto-Industry (#GotBitcoin)
As of July 9, the investment instrument is yielding a 296% appreciation YTD — a stratospheric increase as compared with mainstream investments reflected in the S&P 500 (18.7%) and Global Dow (12.9%) over the same time period.
As of the end of June, a WSJ report had indicated that the fund’s dizzying returns had secured its spot as the best-performing fund in the market. The trust purchases bitcoin (BTC) directly and trades its shares on the over-the-counter (OTC) exchange OTCQX, as the report noted at the time.
WSJ further underscored the fact that the fund’s meteoric performance is not unprecedented — during bitcoin’s historic winter 2017 bull run, the GBTC reportedly reflected a 1,391.44% appreciation over the course of the year to date.
Grayscale — which is owned by Digital Currency Group Inc. — revealed to the WSJ that the GBTC’s assets under management as of June 28 had hit $2.56 billion, accounting for the lion’s share of Grayscale’s total $2.69 billion worth of assets.
Those seeking to receive a primary issue of the trust fund must hold accredited investor status and invest a minimum of $50,000 held in shares for at least a year before resale on OTCQX.
Alongside its flagship trust, which launched in September 2018, Grayscale has rolled out a series of single crypto asset funds — among them ethereum classic (ETC), zcash (ZEC) and litecoin (LTC) — as well as diversified offerings, such as its Digital Large Cap Fund.
As a Grayscale report published earlier this year revealed, institutions accounted for 66% of investments, with 88% of new inflows coming into GBTC — a trend the company characterized as the “return of the Bitcoin maximalist.”
Yesterday, the firm announced it was resuming private placement of shares in GBTC, with one share currently representing 0.00097876 BTC.
In May, Grayscale had reported that out of its total $2.1 billion in assets under management, $1.97 billion were in its Bitcoin Trust.
That same month, Grayscale’s research indicated that bitcoin had gained 47% between May 5–31 at a time of intensifying United States-China trade tensions, making it the best-performing asset of the period — in stark contrast to the Chinese yuan’s faltering.
Grayscale: Q3 Saw Record High Inflows, Growing Institutional Interest
Digital asset management giant Grayscale registered over $254 million in total investment into its products in the third quarter of 2019.
In its Digital Asset Investment Report for Q3 2019, Grayscale provided details on the inflows into its products for the period from July 1, 2019 through Sept. 30, 2019.
The third quarter of the year marked the highest demand for the company’s offerings since its establishment, resulting in $254.9 million of inflows. The figure shows a threefold quarter-on-quarter increase, from $84.8 million last quarter.
The quarterly inflows into Grayscale Bitcoin Trust amounted to $171.1 million, wherein July was the month with the highest level of inflows during Q3. As reported in July, Grayscale Bitcoin trust outperformed indices in the first half of 2019, up almost 300% on the year at the time.
Domination of institutional investors
Institutional investors were the major contributors to the company’s products both in Q3 and year-to-date, with 84% and 83% respectively. Worth noting, total investments into Grayscale products from Jan. 1, 2019 through Sept. 30, 2019 amounted to $382.3 million, while the figure over the past 12 months is $412.3 million.
Previously, Grayscale’s director of sales and business development Rayhaneh Sharif-Askary stated that institutional investors are constantly piling into the space in 2019. Sharif-Askary said:
“You know, it’s really funny, I get asked this a lot — there’s this rhetoric in the media about when are institutional investors going to get involved, when are they going to start investing, and it’s so funny because it’s ironic. We see institutional investors invest with us all the time and that’s been the case for a long time now.”
Ahead Of Conquering The Market
On Oct. 14, Grayscale Investments was approved by the United States Financial Industry Regulatory Authority (FINRA) to publicly quote its Grayscale Digital Large Cap Fund on over-the-counter markets. This purportedly enables the first publicly quoted security based on a selection of digital currencies in the U.S.
In August, Cointelegraph reported that Grayscale was going to move almost $3 billion worth of its digital currency holdings to American major crypto wallet provider and exchange Coinbase. Coinbase Custody would then serve as custodian of the underlying assets for the company’s products.
Grayscale: 84% of Q3 Interest Came From Non-Crypto Hedge Funds
Grayscale’s Michael Sonnenshein contends that the asset manager’s recent Form 10 filing with American regulators would be “a milestone” for the crypto industry if it’s approved.
Sonnenshein — managing director at the world’s largest digital asset manager, Grayscale Investments — made his remarks during an interview with CNBC on Nov. 20.
Hedge Funds After Digital Asset Exposure
Earlier this week, Grayscale filed a registration statement on Form 10 for its publicly traded Bitcoin (BTC) fund Grayscale Bitcoin Trust (GBTC) with the United States Securities and Exchange Commission (SEC).
If approved, the trust would become the first cryptocurrency investment vehicle to attain the status of a reporting company by the SEC. In his interview with CNBC, Sonnenshein noted the robust institutional interest in cryptocurrency access products. Even just in Q3 2019, he said:
“84% Of Inflows Were From Non-Crypto Hedge Funds That Want Digital Asset Exposure.”
GBTC has been trading since May 2015 and Sonnenshein noted that “if we just look at the last 3-month trading volume, it’s tripled year-over-year,” regardless of Bitcoin’s performance on the spot markets.
Regarding the significance of the SEC potentially giving the green light to Grayscale’s Form 10 filing, Sonnenshein said:
“You have a lot of companies that want to have exposure to the space, but then you start to ask, who at the company is going to have the keys? Who at the company is going to do the due diligence and the ongoing compliance?”
Aside from compliance benefits, he emphasized the importance of creating a family of products that “look and feel like many of the other instruments these institutions use.”
Halving, Not Institutions, Will Drive Bitcoin’s Price
The takeaway, he suggested, is that if Form 10 is deemed to be effective, we’ll see for the first time “greater access for institutions who need an SEC reporting company to be able to invest” and “quicker liquidity options, so that investors can divulge their holdings after six, as opposed to twelve, months.”
Regarding any potential impact on Bitcoin’s price, Sonnenshein discarded the institutional investor adoption narrative and emphasized instead Bitcoin’s forthcoming halving — and consequent diminishment of supply — as a factor that has historically shown itself to have a positive impact on the asset’s price.
As reported, Grayscale’s regulatory foray follows a record year for the trust, which saw inflows of $254 million in total investment into its products in the third quarter of 2019.
VC Giant Grayscale Investments Reports Record-Breaking Year
Venture capital firm Grayscale Investments banked a stellar 2019 to surpass the $1 billion mark in total investments.
By The Numbers
In a comprehensive eighteen-page report, the firm touted a record Q4 in 2019. It raised $225.5 million into its investment products, lifting the year’s inflow to $607.7 million after back-to-back quarterlies over $225 million, possibly signaling a larger market trend.
71 percent of the year’s inflow sprung from institutional investors. Managing director Michael Sonnenshein told Cointelegraph:
“We saw record-breaking investment into Grayscale’s family of products, illustrating continued demand from investors for digital currency access products and with a majority of investment coming from institutions, it’s clear that we’re experiencing institutional adoption.”
Existing clients amassed 75% of capital raised. 36% of Grayscale clients now use multiple company products. The company saw its client base grow by 24%.
Grayscale Investors Love Bitcoin
Grayscale Bitcoin Trust, which Cointelegraph first reported on last year, led 2019’s investment demand with $471.7 total — $193.8 million of it raised in Q4, another historical high for the New York-based firm.
Signaling a shift among traditional institutions, communications director Marissa Arnold told Cointelegraph, “As the largest digital currency asset manager, we feel that our numbers are indicative of broader market sentiment and institutional flows into digital currency.”
As younger investors continue finding Bitcoin and other digital currencies safer investments, especially as Bitcoin enjoys a slight surge, this may be the case.
Projecting The Larger Crypto Market, Arnold Added:
“The asset class is experiencing increased validation from legacy companies like Fidelity and CME, signaling to institutions and the investment community as a whole that crypto as an asset class is here to stay.”
Grayscale’s Bitcoin Trust Is Now Open To More Investors As SEC Reporting Company
Grayscale Investments’ bid to register its Bitcoin Trust as an Securities and Exchange Commission (SEC) reporting company has succeeded.
The trust became the first publicly-traded bitcoin investment vehicle on an over-the-counter market in May 2015, and Grayscale filed a Form 10 to the SEC in November, opening the trust up to investors currently restricted from participating in non-regulated vehicles. The Form 10 filing was automatically deemed effective 60 days after it was filed.
The trust’s shares are now registered under the Exchange Act of 1934, making the Grayscale Bitcoin Trust the first cryptocurrency investment vehicle to become a reporting company. The trust now has to publicly file its quarterly and annual reports as 10-Qs and 10-Ks with the SEC and publish updates on unscheduled material events and corporate changes.
The new status also reduces the statutory holding period for accredited investors from 12 months to six months.
Grayscale Now Holds 1.7% of Bitcoin Supply After Record $500M Quarter
Almost 2% of the world’s Bitcoin (BTC) supply is now under the control of a single company: Grayscale and its Bitcoin Trust (GBTC).
In its latest quarterly report on April 16, Grayscale revealed that GBTC now contains 1.7% of the circulating supply of Bitcoin.
Bitcoin Investors Shun “Risk-Off” Mood
In terms of assets under management as a proportion of the total cryptocurrency market cap, Grayscale controls 1.2% of the world’s crypto.
The Bitcoin ownership figure is up 0.1% since the end of 2019, underscoring the fact that the huge market uncertainty sparked by coronavirus has yet to reverse Grayscale’s fortunes.
Overall, Grayscale’s ten crypto funds attracted over $500 million in investments, making it its best quarter on record.
“Quarter-over-quarter inflows more than doubled to $503.7 million, demonstrating demand is reaching new peak levels, even in a ‘risk-off’ environment,” the report summarizes.
As Cointelegraph reported, institutional investors have appeared to weather the coronavirus storm with particular resilience. Activity across Bitcoin futures markets, for example, bounced back from March lows within weeks.
In terms of investment in Q1 2020, Grayscale meanwhile said that hedge funds made up the vast majority of cash, at 88% of the total.
“The mandate and strategic focus of these funds is broadly mixed and includes Multi-Strat, Global Macro, Arbitrage, Long/Short Equity, Event Driven, and Crypto-focused funds,” the report adds.
Institutional Sentiment In Flux
Despite mixed opinions as to the impact of vast swathes of institutional investors handling Bitcoin, either directly or indirectly, a survey this week suggested that users no longer see the sector as the main threat to Bitcoin price stability.
Instead, macro factors including coronavirus are the main area of concern, the roughly 10,000 responses to the survey by stock-to-flow creator PlanB revealed.
Previously, futures markets in particular formed the center of speculation over price manipulation.
What Does Grayscale’s GBTC Falling Premium Tell Us About Bitcoin Price?
The premium on Grayscale Bitcoin Trust shares has dropped despite the recent recovery in the Bitcoin price. Is this a bearish sign?
Grayscale’s Bitcoin Trust shares (GBTC) are currently trading at $7.49 per share, a 15.81% premium of Bitcoin. GBTC is the first publicly quoted security “solely invested in and deriving value from” Bitcoin and since listing it has been known to trade at a high premium, having hit a 2020 high of 41.42% on Feb. 18. The premium is usually accentuated when prices are high.
The GBTC-BTC premium has dropped by over 30% since February this year, following Grayscale’s registration as a reporting company with the United States Securities and Exchange Commission as well as another private placement of its shares in February.
The Bitcoin price (BTC) is currently sitting at $7,058, having rallied by 21% in the last month. Although a pullback is still possible, Bitcoin price has recovered from the March 13 crash, and the reduced premium between GBTC and BTC is yet another bearish sign for Bitcoin as market sentiment continues to point toward extreme fear among investors.
Low Institutional Appetite?
The falling premium between GBTC and the Bitcoin price can be interpreted as a sign of reduced appetite from institutional investors who, according to Grayscale, make up 80% of its client base for the Bitcoin Trust.
This perspective could be further backed by the lowered volumes in the CME regulated futures market which in March saw a 44% decrease from the previous month. This is despite volumes increasing in unregulated derivatives markets and in spot markets alike.
However, Grayscale has seen increased interest from institutional investors having reported investments reaching a record-breaking $171.7 million during a single month of private offerings in 2019. While the coronavirus and the Black Thursday crash may have shaken the market, Grayscale currently manages $2.1 billion in assets for GBTC and other developments like Qi3’s Bitcoin fund show that there is still institutional demand to be filled.
There are other factors to consider in order to understand the GBTC-BTC premium and why it seems to be dropping ever lower. While the premium is generally accentuated or decreased in bullish or bearish markets, the dynamic of the GBTC premium may be changing permanently.
Increasing Liquidity For GBTC
GBTC offers periodic private placement rounds that are available to accredited investors. In previous offerings, investors had a 1-year lockup period during which shares could not be sold since the products were not registered with the SEC.
After this period, investors could sell shares in over-the-counter markets, given that Grayscale does not provide a redemption service for the underlying native asset.
This system creates a liquidity cycle and increases selling pressure one year after each private placement event. Coinmetrics co-founder, Nic Carter, pointed this out in a January tweet. Carter wrote:
“I’d be willing to bet that the GBTC premium will be crushed to single digits on the week of July 15 2020 and October 21 2020.”
However, while Carter’s observation holds true, the date may come sooner than expected as Grayscale’s registration as a reporting company with the SEC would grant its products a reduced lockup period of 6 months. This could possibly result in increased liquidity and reduced premiums.
Hedge Funds And Risk-Free Arbitrage
Although GBTC is also available to retail investors, Grayscale’s recent report shows that overwhelming interest comes from institutional investors, particularly hedge funds.
According to Keegan Toci, Partner at Vertical Ascent Capital Management, accredited investors have an excellent opportunity to short GBTC at a premium, buying it back at a discount for the NAV price in which private placement events are priced.
The selling pressure created by arbitrage, along with the possibility for early liquidity provided by the SEC registration and negative sentiment in the market have created the perfect storm for GBTC’s falling premium.
The “Days Of High Premiums Are Over”
While the premium in GBTC has usually increased after private placement events and especially during Bitcoin price rallies, it’s possible that the GBTC and Bitcoin price will see a narrower gap from now on. As new options for institutional investors appear in the market, competition may drive these premiums down.
According To Nic Carter:
“I find it extremely plausible that in a flat market 100s of millions in sales of GBTC (look at the subscription volume) would crush the premium. plus, there’s many other ways to get exposure to BTC than GBTC these days. days of high premium are over.”
As options for institutional exposure to the Bitcoin price continue to widen, one thing seems to be clear: the infrastructure required for the long-awaited institutional boom continues to become more robust and diverse.
Although the coronavirus has instilled fear in investors, Bitcoin may hold true as a store of value, much like gold, and the upcoming halving may jumpstart yet another bull rally for Bitcoin and pave the way for increased institutional interest.
Institutional Investment Builds in Q1 2020, Sentiment Toward Crypto Funds Changing
As Grayscale reveals it holds 1.7% of all Bitcoin in circulation, institutional investors seem to be gaining more confidence in Bitcoin.
A recent report by Grayscale, a cryptocurrency venture capital company, revealed the firm now holds roughly 1.7% of all of Bitcoin’s supply in its Bitcoin Trust (GBTC). Having seen the biggest quarter yet, Grayscale’s share of Bitcoin increased by 0.1% in 2020 despite current market uncertainties brought about by the COVID-19 pandemic.
Rayhaneh Sharif-Askary, Grayscale’s head of investor relations, told Cointelegraph that “the majority of capital invested into our products comes from institutional investors.” He elaborated:
“We saw 88% of the $503.7M in capital invested into our family of products come from institutional investors this past quarter. Our recent conversations with investors reinforce the idea that now, more than ever, investors are going to be looking for ways to build resilient portfolios. Moreover, the implications of the current, unprecedented monetary policy are causing previously skeptical investors to take another hard look at the asset class.”
While the Bitcoin Trust is the most popular among the company’s family of products, the increased inflow was experienced across the board, with Bitcoin (BTC) and all other altcoin-based trusts seeing around half a billion dollars in investment — double that of Q3 and Q4 2019. In Q1 2020, approximately 38% of Grayscale’s investors entered multiple Grayscale products in order to diversify their crypto holdings.
The Grayscale Bitcoin trust received around $389 million in investment throughout the quarter, which means that if GBTC was an exchange-traded fund, it would be among the 5% of year-to-date inflows. Moreover, GBTC is also one of most-traded OTC securities and has received the title of one of the most active securities in terms of trading volume in 2019, which further signals demand among institutional investors and traders.
While GBTC also targets retail investors, institutional players make up the overwhelming majority of capital inflow. Institutional investors represented 88% of the investment capital generated in the first quarter of 2020, most of which are hedge funds.
Has Institutionalization Arrived?
Grayscale was the first regulated crypto product to hit the market, having been launched in 2013. Since then, the company has expanded into a number of altcoin-based funds. However, the supply of options for institutional exposure has continued to grow, especially over the last couple of years.
Exchange-traded products like the physically-backed Bitcoin ETPs from Amun AG and from WisdomTree — both of which are currently trading in the Switzerland SIX stock exchange — are an example of readily available exposure for institutional players.
Most recently, 3iQ has announced the launch of its Bitcoin close-end fund on the Toronto Stock Exchange, which leverages price indexes by CryptoCompare and VanEck Europe subsidiary MVIS and custody services by Gemini. Cameron Winklevoss, Gemini’s president, recently told Cointelegraph: “This mirrors the growing appetite that institutional and retail investors alike are demonstrating for incorporating crypto assets into their larger portfolios.”
Exposure to derivative products has also become widely available for institutional investors in the last month through the Chicago Mercantile Exchange’s Bitcoin futures and options contracts as well as Bakkt’s physically-settled Bitcoin futures and LedgerX’s regulated derivatives products.
It’s important to note that the interest and volume on these paper markets is miniscule when compared to unregulated activity. According to Jonathan Hobbs — chartered financial analyst, author of The Crypto Portfolio and the chief operating officer at Ecstatus Capital — institutional demand is already here, but the challenge is finding compliant products that can satisfy their standards. Hobbs told Cointelegraph:
“As time goes by more traditional hedge funds, fund of funds and family offices are starting to see that Bitcoin and digital assets can offer them diversification. The main challenges for them lie in having digital investment products that will pass their compliance checks. Over the last few years we have seen the digital space mature considerably, with several infrastructure improvements that are making Bitcoin more accommodating to professional investors.”
Market Sentiment Among Institutional Investors
Grayscale’s results are impressive and show that institutional investors are looking to gain exposure to Bitcoin and other digital assets even during the current climate, where uncertainty and fear are becoming the norm. However, given the current state of affairs, Bitcoin is left for those with a higher risk appetite. Matt D’Souza, CEO of Blockware Solutions and digital currency hedge fund manager, told Cointelegraph, “Markets turn on a dime. If you’re not in when the opportunity presents, you’re too late.” He then added:
“While some institutional investors may be looking to bet on Bitcoin on the basis it could theoretically do well in a crisis, managers for the most part want cash which is by far the safest option. Managers that have been around for a long time understand how to last. It’s because their investors are in the stay rich business, not the get rich. This environment warrants capital preservation. As risk appetite comes back into the market I expect Bitcoin to be one of the best opportunities.”
In fact, while compliant offers for BTC are on the rise, data shows that, as of late, regulated derivatives have been losing ground both in terms of volume and open interest in contracts. This trend is observed only in regulated markets, while unregulated derivatives products had their biggest month yet in March in terms of trading volume.
This may suggest that institutional investors who are betting on Bitcoin are doing so as part of a longer-term strategy, given the increased interest in passive products like GBTC but decreased interest for CME’s futures and options.
This trend may soon pivot as large players enter the field. For example, Renaissance Technologies’ Medallion Fund — a hedge fund with $10 billion worth of assets under management — has recently received approval from the United States Securities and Exchange Commission to offer products and services involving the CME-regulated Bitcoin futures market to its clients.
Regulation Is Key
While institutional interest and offerings both seem to be on the rise, there is still a lot of uncertainty when it comes to Bitcoin. There are many aspects in play, from the technology to monetary policy (especially with the upcoming halving), and most importantly, regulation. Bitcoin is still threading uncharted territory when it comes to compliance, and research shows that news involving clear regulatory updates increase demand for Bitcoin.
Grayscale Bitcoin Trust has become an SEC-reporting security, which shows that regulators are willing to work with companies in the industry. According to Sharif-Askary, this type of collaboration is helping drive the industry forward. Hobbs told Cointelegraph that regulators seem “eager to engage, especially from an educational perspective.” He went on to add that Grayscale Bitcoin Trust becoming regulated by the SEC is a vital step:
“This means that the Trust is held to the same reporting and disclosure standards as stocks and ETFs that trade on national exchanges such as NYSE and Nasdaq. It also reinforces that there are ways to proactively work with regulators, within the existing regulatory frameworks.”
What About A Bitcoin ETF?
While the long-awaited Bitcoin exchange-traded fund is still nowhere to be seen, it seems that institutional demand is already here. While the cryptocurrency industry still needs to make adjustments to ensure more transparency and compliance, it seems that the right steps are being taken. In the meantime, regulated alternatives to the Bitcoin ETF continue to increase.
The latest attempt at a Bitcoin-related ETF was made by Wilshire Phoenix. The proposal was rejected by the SEC, who cited lack of a surveillance-sharing agreement with a significant market for the underlying asset or a novel demonstration of the market’s inherent resistance to manipulation.
Nevertheless, companies in the space are pushing toward a more transparent market. Crypto data forensics companies are working alongside service providers and regulators to create a more transparent market, which will play a big role in the approval of an ETF. However, according to Hobbs, this may not be as significant as the community thinks:
“With crypto products such as the CME Bitcoin Futures, the Grayscale BTC Trust in the U.S. and the Wisdom Tree Bitcoin ETP, there are already options for institutions to get passive ‘buy and hold’ Bitcoin exposure without having to buy it directly. Also, not all institutional investors who want to go digital are looking for passive Bitcoin exposure, which is what you get with an ETF. Many of them are looking for regulated digital quant funds like Ecstatus Capital which can trade Bitcoin long and short.”
Whether 2020 becomes the year of the Bitcoin ETF is unclear, but one thing is certain: Compliant options exist and are becoming increasingly available. With or without an ETF, regulation is the key to advancing the industry, and if the industry continues to mature, an ETF may be just another milestone on Bitcoin’s road to mass adoption.
Grayscale’s Bitcoin Holdings Pass $3 Billion, Growing 76% Year-on-Year
American digital asset management fund Grayscale has continued to grow, with its total assets under management hitting $3.8 billion.
Grayscale, a major digital asset management fund, has continued to grow this year, with its total assets under management, or AUM, hitting new highs.
According to a May 19 tweet, Grayscale’s total AUM hit $3.8 billion, surging over 80% from $2.1 billion in May 2019.
Bitcoin trust continues to gain momentum
Grayscale’s Bitcoin (BTC) trust has continued to lead other cryptocurrencies in the fund, accounting for $3.36 billion, or 89% of the firm’s total AUM. The value of Grayscale’s Bitcoin investment trust surged 76% from last year’s $1.9 billion. At the same time, Grayscale’s Bitcoin trust’s share saw a small drop, slipping from 94% in May 2019.
The massive value spike of Grayscale’s Bitcoin trust comes amid a significant increase of BTC price year-on-year. As of press time, Bitcoin trades at $9,745, up around 30% from $7,600 one year ago.
According to the data, Grayscale Ethereum (ETH) Trust is now the second-largest trust among the total 10 trusts in the fund. Grayscale ETH trust accounts for $289 million and is followed by Grayscale Ethereum Classic (ETC) Trust, which holds $73 million.
Created by Digital Currency Group in 2013, Grayscale is a major global crypto investment fund. The fund is regulated by global authorities like the United States Financial Industry Regulatory Authority and Securities Exchange Commission. Grayscale reportedly became the first digital asset trust that started reporting to the SEC in January 2020.
In April 2020, Grayscale reported that the firm was holding about 1.7% of all of Bitcoin’s supply in its Grayscale Bitcoin Trust. At the time, the firm also said that it saw its biggest quarter ever despite the economic crisis fueled by the COVID-19 pandemic.
Grayscale Is Now Buying 1.5 Times The Amount of Bitcoin Being Mined
Independent researcher Kevin Rooke estimates that Grayscale has ramped up its Bitcoin accumulation to a rate equivalent to 150% of the new BTC created since the halving.
Crypto fund manager Grayscale Investments is accumulating Bitcoin at a rate equivalent to 150% of the new coins created by miners since the May 11 block reward halving.
According to data published by independent crypto researcher Kevin Rooke, Grayscale has added 18,910 BTC to its Bitcoin Investment Trust since the halving, while only 12,337 Bitcoins have been mined since May 11.
Binance CEO Changpeng Zhao reposted the chart, commenting: “There isn’t enough new supply to go around, even for just one guy”.
Grayscale Absorbs BTC Supply
Last week, Rooke estimated that Grayscale had been buying Bitcoin at a rate equal to between 33% and 34% of new supply during the first quarter of 2020, having accumulated 60,762 BTC over 100 days.
During the quarter, Grayscale also saw average weekly investment into its trust reach $29.9 million — comprising an 800% gain year-over-year.
In response to Rooke’s tweet publishing the figures, Grayscale founder Barry Silbert commented: “just wait until you see Q2.”
Rooke’s latest data indicates that Grayscale is now purchasing nearly double the number of coins per day on average — with Rooke’s post-halving estimate equating to 1,112.35 BTC per day, up from 607.62 BTC during Q1.
Grayscale Sounds Off On CBDCs
In a recent report published by Grayscale, the firm sought to rebuke analogies comparing Bitcoin to central bank-issued digital currencies (CBDC).
“CBDCs are sometimes viewed as synonymous to, or as replacements for, digital currencies like Bitcoin, but they represent a meaningful departure from the decentralized protocols inherent to many cryptocurrencies,” the report stated.
“CBDCs attempt to upgrade payment infrastructure while Bitcoin is an attempt to upgrade money. If CBDCs gain traction, they may actually bolster the value proposition for Bitcoin and other digital currencies,” Grayscale added.
The report echoed the sentiment of economist John Vaz, who recently told Cointelegraph that CBDCs comprise “a kind of rearguard action being fought by the central banks because they don’t like cryptocurrency”.
“Central bank digital currencies are probably more about tracking money than providing benefit,” Vaz observed.
Crypto Funds In Demand, Institutions See Bitcoin As Alternative Hedge
Grayscale Investments has been gobbling up Bitcoin in recent months, and most of its investors are institutions — but other funds are doing it, too.
While the theater world has Waiting for Godot, the crypto sphere has its own drama: Waiting for the Institutional Investor. Recently, there have been some promising sightings. Grayscale Investments has been buying up Bitcoin (BTC) at a great rate in recent months.
Indeed, since the May 11–12 rewards halving event, the fund has been accumulating BTC at a rate equivalent to 150% of all the new Bitcoin mined, Cointelegraph reported on Thursday. The firm now has $3.2 billion in assets under management, or AUM, in its Grayscale Bitcoin Trust. Significantly, more than 90% of new inflows are from institutional players, according to the company.
Grayscale may not be alone in attracting institutional attention. Eric Ervin, the president and CEO of Blockforce Capital, an asset management firm that operates in the crypto space, told Cointelegraph: “We are seeing more institutional interest. I think this would be true regardless of the halving or the QE taking place, even more so given the unprecedented fiscal and monetary global stimulus.”
Lennard Neo, the head of research at Stack Funds, told Cointelegraph that institutional investors have been looking for alternative solutions not just to provide returns but also to protect their existing portfolio from further downside risks, explaining:
“Similar to Grayscale, Stack has seen an uptick in investors’ interest — almost double that figures of pre-crash in March — in Bitcoin […] I would not say they are ‘gobbling up BTC’ blindly but cautiously seeking traditional structured solutions that they are familiar with before making an investment.”
Paul Cappelli, a portfolio manager at Galaxy Fund Management, told Cointelegraph: “We’re seeing increased interest from multiple levels of investors — wealth channels, independent RIAs and institutions.” The recent BTC halving came at an interesting time — amid the COVID-19 outbreak and the growing unease about quantitative easing. He noted: “It clearly demonstrated BTC’s scarcity and future supply reduction as concerns deepened around unprecedented stimulus by the Fed with the CARES Act.”
Goldman Sachs Raises Doubts
Not all are knocking at Bitcoin’s door, though. In a May 27 presentation to investors, Goldman Sachs, the storied investment bank, listed five reasons why cryptocurrencies are not an asset class, which included Bitcoin, noting: “While hedge funds may find trading cryptocurrencies appealing because of their high volatility, that allure does not constitute a viable investment rationale.”
Crypto’s denizens reacted combatively. Referencing the quality of Goldman Sachs’ recent Bitcoin research, Gemini’s Tyler Winklevoss declared in a tweet: “Today, Wall Street is where you end up when you can’t make it in crypto” — and he followed up on May 28 with: “Day after Goldman Sachs says don’t buy bitcoin, bitcoin is up +$500.” Mati Greenspan of Quantum Economics wrote in his May 27 newsletter: “Regardless of what Goldman Sachs sell-side analysts have to say, it’s quite clear that institutional interest has been picking up lately.”
On the matter of investment suitability, a recent Bitwise Asset Management research report made the case for adding Bitcoin to a diversified portfolio of stocks and bonds, noting that on average, “a 2.5% allocation to bitcoin would have boosted the three-year cumulative return of a traditional 60% equity/40% bond portfolio by an astonishing 15.9 percentage points.”
Overwhelming The Market?
In the roughly two-week period since the BTC rewards halving, which reduced miners’ block reward from 12.5 BTC to 6.25 BTC, 12,337 Bitcoin were mined as reported by researcher Kevin Rooke on May 27. During that same period, Grayscale’s Bitcoin Trust purchased 18,910 Bitcoin — about 1.5 BTC for every Bitcoin created. This has raised some questions about the overall BTC supply.
Binance CEO Changpeng Zhao commented on Rooke’s findings in a tweet: “There isn’t enough new supply to go around, even for just one guy [i.e., Grayscale].” Greenspan, for his part, told Cointelegraph: “It seems like institutional players are gradually becoming a much larger part of this small market.” Might they overwhelm the market? “Whales have always been an issue,” he opined.
As noted, Grayscale Investments reported $3.2 billion in AUM in late May. To put this in context, the total AUM of crypto hedge funds globally increased to over $2 billion in 2019 from $1 billion the previous year, according to the 2020 PricewaterhouseCoopers–Elwood Crypto Hedge Fund Report. Most crypto hedge funds trade Bitcoin (97%), followed by Ethereum (67%), with the vast majority of investors in crypto hedge funds (90%) being either family offices (48%) or high-net-worth individuals (42%).
This is an imperfect comparison, though, because the PwC–Elwood report only tracked hedge funds and excluded crypto index funds — including passive/tracker funds like Grayscale’s, which basically track the price of BTC. As PwC’s Global Crypto Leader Henri Arslanian told Cointelegraph, it “goes up or down solely based on the price of BTC and not due to the skills or activities of the fund manager.” It also excluded crypto venture capital funds that make equity investments in crypto firms. Still, the comparison suggests something of the magnitude of Grayscale’s BTC commitment.
When contacted by the Cointelegraph, Grayscale Investments declined to provide any specific details about its recent BTC buying spree, or why other institutional investors might be snapping up BTC. “We’re not going to talk about momentum following the halving until mid-July when we’ll publish our Q2 numbers,” a spokesperson said.
But Michael Sonnenshein, the managing director of Grayscale Investments, told Cointelegraph that investors have typically tried to shield their portfolios from market shocks or during times of uncertainty with fiat currencies, government bonds and gold:
“All three are facing issues this time around. Bitcoin has emerged as an alternative hedge, operating independently of the dramatic monetary policies enacted by central banks.”
The halving is the most dramatic and immediate recent BTC event, but industry sources mostly cited other reasons for the recent institutional attentiveness. Stimulus packages, like the $3-trillion coronavirus relief package passed by the United States House of Representatives on May 15 — and attendant fear of inflation — is chief among their concerns. David Lawant, a research analyst at Bitwise Asset Management, told Cointelegraph:
“In our view, institutional interest was on the rise since the beginning of the year, but it really took off after the unprecedented government response to the COVID-19 crisis.”
Neo cited rising geopolitical tensions, like those between the U.S. and China, which have put “further stress on an already weakened economy, and in turn, increased Bitcoin’s appeal.” Arslanian told Cointelegraph:
“We are continuing to see increased interest from institutional investors. But more than the halving, it’s the availability of institutional-grade offerings, from regulated crypto funds products to regulated custody and many offerings that are making this possible.”
The participation of hedge fund icons like Paul Tudor Jones has to be factored in as well. Jones’ recent letter “making the case for Bitcoin as his preferred hedge against what he calls ‘the great monetary inflation’ has significantly reduced career risk for many of his peers considering an allocation to Bitcoin,” Lawant told Cointelegraph. In a May investment report, Cappelli wrote:
“Not only has institutional infrastructure progressed, but as the world changes important players are entering the space. The most successful hedge fund of all time, Renaissance Technologies, recently announced their intention to trade bitcoin futures.”
Lawant believes that: “In the lenses of mainstream investors, I think that 2020 is the year in which Bitcoin moved from being a venture capital bet to a macro hedge.”
What’s more, the halving event had some impact, too, as Arslanian believes that more attention has been brought to how Bitcoin works, adding: “The fact that this happened as the world is going through record quantitative easing from central banks also brought attention on how money is created and the role that it plays in society.” People who were otherwise ignoring this asset class are now starting to take notice, added Ervin. He continued:
“Like any disruptive technology or asset class, first the explorers and pioneers, then slowly more people enter, before finally the technology ‘crosses the chasm’ and reaches mainstream adoption and investment. I would say we are in the very early days.”
To summarize, global unemployment has been soaring, and economic stimulus is clearly on the minds of governments and central banks. The European Commission’s recently proposed $826-billion virus recovery plan was just the latest instance. Quantitative easing may be necessary under these unique circumstances, but it set off inflation alarm bells among some institutional investors.
The halving event may not have persuaded financial institutions to invest in Bitcoin, but it did remind them, once again, that BTC, unlike fiat currencies, has a fixed supply (21 million BTC). Given the world’s inflation anxieties, is it surprising that institutional players might throw some hedge fund money Bitcoin’s way?
Grayscale Is Buying Up More Than Just Bitcoin
22% of crypto fund manager Grayscale Investments’ purchases have been Ether throughout 2020 so far, totaling $110 million worth of accumulation.
While great attention has been paid to the recent enormous accumulation activities of the Grayscale’s Bitcoin Investment Trust, or BIT, the crypto fund manager has also been aggressively growing its Ether (ETH) stash.
Speaking on a recent episode of the Coinscrum markets podcast, Grayscale’s director of investor relations, Ray Sharif-Askary, revealed that $110 million worth of ETH has been purchased by the firm during 2020 so far.
Institutional Investors Diversify With ETH
As such, Grayscale’s purchases are equal to 0.4% of Ethereum’s total market cap in the past five months. Sharif-Askary noted that over 38% of Grayscale’s current clients now hold more than one crypto asset, up significantly from roughly 9% as of 12 months ago.
“It is encouraging to investors […] diversify within the digital currency asset class, just like they would with any other traditional asset class,” she stated.
Over the same period, Grayscale has purchased $390 million in Bitcoin (BTC), equal to 0.2% of the market’s capitalization. The firm is reportedly buying BTC at a rate equal to 1.5 times the quantity of new Bitcoin created through mining.
Grayscale Ethereum Trust Explodes
Grayscale’s Ether accumulation has coincided with a dramatic year-to-date (YTD) performance for shares in the Grayscale Ethereum Trust, which have increased nearly 800% with the market’s last recorded trade closing for $210.
Within the last 24 hours, the trust briefly tested $250, offering YTD returns of 995% to investors who purchased shares at the start of January.
Institutions Seek Inflation Hedge Amid Uncertainty
Sharif-Askary attributed Grayscale’s enormous crypto accumulation to institutions seeking a hedge fledge against inflation in response to U.S. monetary policy amid the COVID-19 crisis.
“From a border perspective, COVID-19 and the policy implications especially have really set the stage for Bitcoin to become seen as a store of value asset. […] Institutional investors are taking active long positions in digital assets through our products, and it’s because they are looking for an asset that is scarce and that can be used as an inflation hedge in a world where we are faced with unprecedented monetary stimulus.”
“We’ve never seen demand like this before for our products,” she added.
Three Arrows Capital Now Holds More Than 6% of Grayscale’s $3.6B Bitcoin Trust
Three Arrows Capital, a crypto fund management firm based in Singapore, has acquired a significant stake in the Grayscale Bitcoin Trust (GBTC), according to a new filing with the U.S. Securities and Exchange Commission (SEC).
The firm filed a schedule 13D disclosure to the SEC on Thursday after accumulating 21,057,237 shares, or 6.26%, of the trust for an amount valued over 20,000 bitcoin (BTC) or around $192 million, according to a filing dated June 10. (Grayscale is a subsidiary of Digital Currency Group, CoinDesk’s parent firm.)
A Schedule 13D form or beneficial ownership report is required when a person or group (firm) acquires more than 5% of any class of a company’s shares. The information must be disclosed to the SEC within a 10-day period from the date of the transaction under current regulations.
Grayscale Investments is the world’s largest digital currency asset manager with its flagship product, the Grayscale Bitcoin Trust that was set up in 2013. As of June 11, the trust holds approximately 365,000 bitcoin worth $3.6 billion, according to Grayscale’s website.
“Grayscale is one of the most professional and beneficial companies in the crypto ecosystem. We enjoy working with their team and are proud to be the first investor to file a Schedule 13D/G with the SEC for over 5% ownership,” said Su Zhu, CEO and co-founder at Three Arrows Capital.
On January 21, GBTC became an SEC-compliant reporting company after filing a Form 10 with the SEC. Also known as the General Form for Registration of Securities it is used to register a class of securities for trading on U.S.-based exchanges. A company with over $10 million in total assets under management is required to file a Form 10 with the SEC.
The firm bought 38,888,888 shares issued by Grayscale’s Bitcoin Trust (GBTC) at $34.10 per share. The interesting thing is that each share is redeemable for actual bitcoin at the rate of 0.001 BTC.Although it is unclear whether Three Arrows made the purchase under the directions of a specific client, the large buy currently stands as the biggest one-off purchase. Nonetheless, Three Arrow’s position represents 6.1% of GBTC’s holdings. Speaking on the recent development, co-founder of Three Arrows Capital, Kyle Davies, said:
We continue to enjoy working with the Grayscale team and look forward to investing more in the crypto ecosystem.
Grayscale has been making the headlines for several weeks now. The crypto asset management firm currently stands tall as the largest in the world with its total asset under management sitting at over $20 billion.
Grayscale’s rise to prominence in less than a year is an indication that investors are interested in digital assets.
At This Rate Grayscale Will Own 3.4% of All Bitcoin By January
Grayscale Investments has added 19,879 BTC to its Bitcoin Trust in the last week, purchasing Bitcoin faster than the tokens can be mined.
Grayscale Investments has purchased almost half a billion dollars in Bitcoin since the May block reward halving, and this week bought BTC around three times faster than miners could produce blocks.
According to a June 25 tweet from crypto analyst Kevin Rooke, the investment firm bought 19,879 Bitcoin (BTC) — $184 million worth — in the last week for its Bitcoin Trust, bringing its total number of coins to roughly 400,000.
Grayscale added 19,879 BTC to their Bitcoin Trust since last week (53,588 BTC since the halving).
Bitcoin miners only produced 7,081 BTC since last week (39,544 BTC since halving).
That’s almost 400,000 BTC under management for $GBTC pic.twitter.com/aMtSGHZnz2
— Kevin Rooke (@kerooke) June 25, 2020
Rooke stated that not only is Grayscale buying massive amounts of the cryptocurrency, but it’s now doing so at a rate roughly 280% of the new Bitcoin mined. Twitter user Hodlonaut pointed out:
“Grayscale *alone* has taken all BTC mined + 14,000 more BTC off the table since the halving.”
Grayscale Is Cornering The Market
At the moment, there are 18.415 million BTC in circulation, with the rest presumed lost. Grayscale has bought 53,588 BTC in total since the May 11 halving, equating to an average of 1,190 BTC per day. If it keeps buying at this same daily rate it will own 3.4% of the world’s BTC supply (625,069 BTC) by January 2021 — and 10% by the time of the next halving in 2024.
Grayscale founder Barry Silbert suggested in May that the fund would be ramping up its purchases in the second quarter and it appears he’s a man of his word.
The investment firm announced that it had $4.1 billion in assets under management as of June 25, which means Grayscale’s value has nearly doubled from $2.1 billion in May 2019.
Stocking Up On Ether Too
Grayscale’s Ethereum Fund (ETHE) owns $396 million in Ether. Cointelegraph reported that Grayscale had purchased $110 million worth of Ethereum (ETH) in 2020 as of June 5.
However, while ETHE shares surged over 800% in early June with trades testing $250, they crashed by 50% just days later before settling near $100.
New Grayscale Report: Digital Assets Fund Adds $905M In Record Quarter
Grayscale Investments Q2 report shows a record $905 million inflow as institutions continue to move into Bitcoin, Ethereum and other digital assets.
Grayscale Investments has just released its quarterly report which shows that institutional demand for Bitcoin and other digital assets is still on the rise despite the lack of action from Bitcoin price (BTC). The report shows that Grayscale had yet another record quarter for its digital asset products with $905.8 million dollars invested over that time period.
The nearly $1 billion inflow means Grayscale almost doubled its previous high of $503.7 in the first quarter of 2020. Out of the total amount of funds accrued by Grayscale, Bitcoin continued to lead the pack with 82.92% or $751.1 million invested in Grayscale Bitcoin Trust (GBTC).
Institutional Investors Lead The Pack
Institutional investors continue to be the leading demographic of Grayscale’s digital asset trusts. Currently they account for 84% of investment in the second quarter of 2020.
However, Grayscale saw a significant increase in new investors which represented 57% of the Grayscale investor base during the quarter.
While the percentage of new investors has increased, they only accounted for $124.1 million of the inflow into the Grayscale digital asset products.
Institutions Are Jumping Into Altcoins
While new investors made up a large percentage of the investment coming into the Grayscale products, returning institutional investors also expanded into other assets. This is likely due to the record-low volatility currently seen in the Bitcoin price.
Currently, around 81% of investors have diversified their portfolio into alternative digital assets. The report reads:
“While long volatility was the winning trade in 1Q20, volatility was subdued in 2Q20 as risk assets steadily recovered. In 2Q20, digital assets outperformed most indices, and Zcash, Ethereum, and Stellar led the way returning 72%, 62%, and 62%, respectively.”
The Grayscale Ether trust (ETHE) has seen a significant increase in inflows, having received a record-breaking $135.2 million in investment during this quarter.
This accounts for around 15% of the total inflow into Grayscale’s investment products, which may be the higher premiums in ETHE and the arbitrage opportunity it creates for institutions and accredited investors. Data also shows that while Bitcoin volumes have been dwindling, Ether’s have been rising.
Grayscale Hasn’t Bought A Single Bitcoin In Over 3 Weeks
For several months, Grayscale was buying more Bitcoin than was being mined, but this trend came to a screeching a few weeks ago.
Given the rate at which Grayscale usually buys Bitcoin, it seems like the cryptocurrency fund management company was trying to buy every single Bitcoin in existence. But this pattern ground to a halt more than three weeks ago and hasn’t picked up again since.
Grayscale Bitcoin Trust Fund (GBTC) would typically file a Form 8-K with the Securities and Exchange Commission (SEC) on a weekly basis, declaring its latest Bitcoin acquisitions. But the last time such a report was filed was June 25, when the company disclosed the purchase of almost 20,000 BTC. According to its second quarter report, GBTC was raking in an average of $57.8 million a week in investments.
A Grayscale spokesperson told Cointelegraph that the halt in BTC purchases is temporary, and is due to an administrative quiet period:
“There was an administrative quiet period for the Grayscale Bitcoin Trust private placement. The Trust is now open for subscription as of Friday, July 10 at 4:00pm ET.”
In any case, Grayscale has not issued any SEC disclosures about new Bitcoin acquisitions since then.
Grayscale Is Indicative Of Institutional Interest In Bitcoin
It is important to note that GBTC is not a hedge fund that buys assets on the expectation of profiting from them later.
Instead, it buys Bitcoin whenever investors buy its shares. Currently, each share corresponds to 0.00095891 BTC.
In the second quarter, 84% of the investments into Grayscale came from the institutional investors, mostly hedge funds. Thus, this reversal is indicative of the institutional interest in the asset. The company itself was boasting of its prowess, buying more Bitcoin than was being mined:
“After Bitcoin’s halving in May, 2Q20 inflows into Grayscale Bitcoin Trust surpassed the number of newly-mined Bitcoin over the same period. With so much inflow to Grayscale Bitcoin Trust relative to newly-mined Bitcoin, there is a significant reduction in supply-side pressure, which may be a positive sign for Bitcoin price appreciation.”
Why Did Institutional Investors Stop Buying?
There are at least a couple of possible explanations to this sudden pullback. One is seasonal — July tends to be a slow time for investment activity. Many asset managers travel or take vacation. Another reason could be that Bitcoin hasn’t done much in the last few months.
While its rapid recovery in the wake of Black Thursday attracted a lot of attention from investors who were getting hammered in traditional markets, and were troubled by the uncertainty from unparalleled stimulus packages. But starting in early May, Bitcoin has been stuck in an “undecided” mode. There are plenty of less-mysterious assets that can do the same thing.
Grayscale CEO: US Regulators Can’t Shut Down Bitcoin
Grayscale CEO Barry Silbert believes the United States is past the point where regulators have the support to ban crypto assets like Bitcoin.
Barry Silbert, CEO of cryptocurrency investment firm Grayscale Investments and Digital Currency Group, believes the United States is past the point of no return for banning Bitcoin.
In a Grayscale investor call on July 16, the CEO said he was “cautiously optimistic” about the chances of regulations in the U.S. improving or at least not getting worse for the cryptocurrency.
“For the first time ever, we are past the ‘ban bitcoin’ perceived risk,” Silbert said. “There’s enough support in DC from policy makers and regulators that Bitcoin has a right to exist and ultimately you can’t shut it down.”
The CEO said relationships with regulators are much better off due to the effort made by groups including the Blockchain Association — a group speaking out in favor of many blockchain and crypto companies in front of the SEC — and Coin Center, a non-profit crypto advocacy group.
“As an industry, we’re just much better off than we’ve ever been from a relationship perspective out in DC. [These two groups are] educating policy makers around the benefits of this technology in this asset class. The catastrophic regulatory policy risk that maybe would have existed previously in DC is behind us.”
Institutional Demand For Bitcoin
Cointelegraph has reported that Grayscale reported a substantial increase in the inflow of cryptocurrencies for Q2 2020, which totaled $905.8 million. This was up from $503.7 million in Q1.
How Grayscale Investments Sells Bitcoin To Financial Advisors
At a webinar targeting financial advisors, Grayscale’s managing director preached the value of Bitcoin and warned against physical representations of the asset.
In a webinar hosted by InvestmentNews, Grayscale Investments’ managing director, Michael Sonnenshein, and financial consultant, Tyrone Ross Jr., educated financial advisors about the benefits of crypto investments.
Grayscale offers ten crypto related investment products with its Bitcoin Trust, or GBTC, being by far the largest. Currently, it holds close to 400,000 BTC, though lately, the demand for the product has subsided.
Physical Representations Of Bitcoin Called Into Question
Quite a bit of time was spent on some well known aspects of Bitcoin, like its finite supply and instant settlement capabilities. Sonnenshein also informed the audience that physical representations of the asset are not real:
“And one thing that’s certainly important for you all as advisors and in the investment community is that you oftentimes will see physical adaptations or representations of Bitcoin. But there is, in fact, no tangible Bitcoin.”
Wealth Transfer To Millennials
Sonnenshein drove home that the millennial generation purportedly have quite an appetite for Bitcoin. A few surveys were cited:
“There have been some other studies done by Bankrate and Edelman, and ETF Trends, where we’ve actually seen that millennials are either five times more likely to invest in Bitcoin <…> [or] the percentage of the younger generation are really allocating towards cryptocurrency or expect to be doing so in the near term.”
Another important theme was regulation. Sonnenshein acknowledged that in the past, the lack of regulatory clarity was preventing investors from entering the space, but in his opinion, this is no longer a valid excuse:
“But we’ve come to the conclusion that that can really no longer be an excuse for investors.”
He noted that the IRS has designated Bitcoin as property and the Commodity Futures Trading Commission’s guidelines have allowed for the robust futures markets and even the Federal Reserve comparing it to gold.
Seashells, Coinbase & Solid Planning
Ross chimed in by explaining to the audience that it does not matter if they believe Bitcoin to be seashells, what matters is that they give sound financial advice to their clients:
“I don’t care whether you think it’s seashells or whatever, that’s fine. But at least when the client comes to you, hey, I own some at Coinbase, you can give them a very articulate answer as to why that’s nonsense or to why it’s something that you want to continue to articulate in the broader scope of a financial plan or quarterly fair financial plan.”
Accredited Investors Can Buy Direct Without The Premium
Sonnenshein answered one of the community’s existential questions about the GBTC — why is there such a high premium over the BTC spot price? He explained that accredited investors can purchase newly issued shares of GBTC directly from Grayscale at the net asset value. The premium is dictated by the supply and demand for GBTC on secondary markets. He further noted that Grayscale’s crypto products allow investors to gain exposure to digital assets without having to deal with the entry barriers like wallet management.
Grayscale Ethereum Trust Files To Become An SEC-Reporting Company
Grayscale Ethereum Trust files to become an SEC reporting company amidst the Ethereum bull run.
On August 6, Grayscale Ethereum Trust filed to become an SEC-reporting company.
Amidst the Ether (ETH) bull run, Grayscale Investments voluntarily decided to make its Ethereum Trust an SEC reporting company. The company’s best-known investment product is a Bitcoin Trust that holds around 400,000 Bitcoin (BTC), worth nearly $4,744,800,000 as of press time.
Additionally, its Ethereum Trust currently has 1.9 million ETH in its possession, valued at approximately $746 million. As with other Grayscale products, Coinbase is acting as a custodian.
Grayscale noted that the filing is under review. If approved, it would be the second cryptocurrency investment vehicle to attain such status:
“The filing is subject to SEC review; if the Registration Statement becomes effective, it would designate Grayscale Ethereum Trust as the second digital currency investment vehicle to attain the status of a reporting company by the SEC, following Grayscale® Bitcoin Trust as the first.”
This would likely present the Trust in a more favorable view to potential institutional investors.
81% Of Returning Institutional Investors Invest Beyond Bitcoin
In today’s Medium post, Grayscale pointed out that the demand for its Ethereum Trust in the second quarter of 2020 accounted for almost 15% of all inflows:
“This past quarter alone (2Q20), we saw the average weekly investment into the Grayscale Ethereum Trust hit $10.4 million, amounting to record quarterly inflows into the Trust to the tune of $135.2 million.”
In a statement to Cointelegraph, Grayscale emphasized the increased willingness to diversify beyond Bitcoin for the returning institutional investors. In the last quarter, 81% of these investors diversified their holdings beyond Bitcoin, an increase from 71% over the trailing 12 months.
Grayscale With $3.7 Billion Worth of Digital Assets Under Management. Set To Launch Crypto Ad Campaign On CNBC, MSNBC, FOX, And FOX Business
How Will This Affect Your Portfolio?
Grayscale Investment, the world’s largest crypto asset fund manager is bringing bitcoin (BTC), ether (ETH) to people’s television.
A Well-Timed Campaign?
In a recent tweet, Barry Silbert, the founder and CEO of Digital Currency Group, the parent firm of Grayscale Investment, Genesis Trading, and crypto publication Coindesk stated that Grayscale is set to kick-start a national ad campaign this week with a TV ad on popular business news channels such as CNBC, MSNBC, FOX, and FOX Business.
The ad campaign is widely being viewed as a catalyst that could fuel the mainstream demand for cryptocurrencies as the market continues its bullish momentum.
Notably, the ads will be aired on business and finance-centric TV channels such as CNBC, MSNBC, and FOX Business, among others, that have a total reach of more than 6.5 million people. Grayscale would want to capitalize on the exposure to such a mammoth audience by on-boarding both young and old individuals onto the bitcoin bandwagon.
As previously reported by BTCManager, a recent report by JPMorgan opined that while gold has for long been the de facto haven asset for the “Baby Boomer” generation, millennials seem to show affinity toward bitcoin.
Another survey report earlier this year released by Los Angeles-based iTrustCapital hinted that more investors are flocking toward digital assets and gold in the wake of the COVID-19 pandemic compared to traditional investment vehicles.
The aforementioned bullish findings, coupled with the US Federal Reserve’s unending printing of the dollar are a testimony to the growing confidence digital assets such as bitcoin enjoy among people looking to park their wealth in safe assets.
On the contrary, however, skeptics continue to berate the world’s premier cryptocurrency.
Earlier this year, goldbug and vocal bitcoin critic Peter Schiff bashed bitcoin saying the pioneer digital coin has no intrinsic value and current BTC holders will suffer huge losses.
Making Bitcoin Mainstream
Grayscale’s upcoming bitcoin ad campaign will be the latest shot in the arm for the industry-wide endeavor that seeks to bring the mainstream populace a step closer to digital assets.
As previously reported by BTCManager, LibertyX, US’s leading bitcoin ATM installer had launched the “Bitcoin on Every Block” campaign to enable the country’s residents to seamlessly buy BTC with cash at 20,000 retail stores and pharmacy chains.
Grayscale Bitcoin Trust Saw Surge In Investor Interest After March
Grayscale’s Bitcoin Trust issued almost twice as many shares, but arbitrage could have played a role.
The Grayscale Bitcoin Trust, an investment tool that aims to provide an indirect exposure to Bitcoin (BTC) for investors in traditional markets, reported a significant increase in how many shares it issued between Q2 and Q1 of 2020.
According to an Aug. 7 filing with the Securities and Exchange Commission, the trust issued more than 87 million shares in Q2 2020, compared to the total of 133 million shares issued for all of 2020.
The trust issued almost 90% more shares in the second quarter of 2020 compared to the first. This also represents more than a six-fold increase compared to the first half of 2019, when only 23 million shares were issued.
Net assets increased by $1.6 billion in Q2 2020 to a $3.5 billion total. About half of this growth came from the appreciation of Bitcoin held by the trust, amounting to 386,720 BTC as of June 30. At current market prices, it would be worth $4.4 billion.
Grayscale is often criticized for the impossibility in redeeming the trust’s shares. Some institutions and accredited investors are able to purchase shares at their true value as determined by how much Bitcoin the trust is holding. However, doing so requires a minimum six months waiting period as the shares in the trust are locked up.
The GBTC trust has consistently traded at a significant premium over its net asset value, meaning that investors are overpaying to gain indirect exposure to Bitcoin.
In addition to the lock up period that limits potential arbitrage plays, some noted that there is no mechanism to balance the trust’s share prices should they trade at a discount.
According to yCharts, the premium generally stays around 20%. However, it saw considerable dips to 10% in April and July of 2020, potentially signaling the presence of arbitrage traders. However, given that the premium returned to mean values, it is unlikely that arbitrage accounts for the entirety of the trust’s growth.
Some of these issues may explain community excitement for a Bitcoin ETF. In addition to potentially trading on well-known exchanges, exchange-traded funds also see a daily arbitrage of their share price compared to the value of its assets, ensuring that their prices track their underlying assets.
Cointelegraph previously reported that Grayscale’s Ethereum Trust trades at even higher premiums.
Interest In Grayscale Crypto Products Not Easing Up, Not Just BTC Now
Grayscale’s exponential growth demonstrates institutional demand for Bitcoin and other digital assets.
Grayscale Investments, the largest digital asset management firm in the world, has been showing exponential increases in investment to its cryptocurrency products.
The total sum of assets under management grew by $1 billion in less than two weeks in July, as a Twitter update showed. Additionally, according to the latest documentation, the number of shares Grayscale issued between the first and second quarters of 2020 increased by 90%.
Considering that in its Q2 update, the firm revealed it had gathered around $900 million throughout the entire quarter, the interest in Grayscale’s products seems to be growing at an exponential rate.
At the time, the firm held over $5.2 billion worth of cryptocurrency collectively, with Bitcoin leading at $4.4 billion. In total, the firm received $1.4 billion in the first half of 2020.
The levels of investment in the Grayscale funds are also exceeding those of late 2017, despite the Bitcoin price not being nearly as high. This is generally thought to be one of the best indicators for institutional interest in digital assets, given that no Bitcoin Exchange Traded Fund has been approved so far.
Demand Not Just For Bitcoin
While Bitcoin is by far the most popular product in the Grayscale family of investment products, other assets have also grown significantly, with Ether (ETH) being the second-biggest gainer.
Grayscale has also recently filed a Registration Statement on Form 10 with the United States Securities and Exchange Commission for the Grayscale Ethereum Trust, designating it a SEC reporting company if validated.
This shows a growing institutional demand for Ether, which is also signaled by growing derivatives volume. This interest is likely powered by the growing activity in the decentralized finance sector and stablecoins.
Grayscale investors have also shown interest in diversifying into several cryptocurrencies by investing in the firm’s Grayscale Digital Large Cap Fund. The fund is the fourth public offering from Grayscale, provides exposure to multiple crypto assets, and is available for over-the-counter share trading. Rayhaneh Sharif-Askary, Grayscale’s head of investor relations, told Cointelegraph:
“In the first half of 2020, Grayscale saw $1.4B in capital invested into the private placements of its family of products. Demand for alt-coins on the rise Demand for products ex-Grayscale Bitcoin Trust is up 35% Q-over-Q and 81% of returning institutional investors in 2Q20 have now allocated to multiple products (an increase of 71% over T12M).”
Shares of Bitcoin Cash and Litecoin are the fifth and sixth public offerings from Grayscale and have recently received permission from the U.S. Financial Industry Regulatory Authority to make both funds available for public OTC trading.
Grayscale Premium And Arbitrage
While Grayscale’s inflows are certainly a sign of institutional interest, also backed by other data sets like CME’s Bitcoin futures Open Interest, some worry these inflows may be exacerbated by accredited investors taking advantage of the premium between the underlying asset and the fund’s share price.
Michael Sonnenshein, managing director at Grayscale recently confirmed that accredited investors can still purchase GBTC at the price of Bitcoin:
“Those asking… YES, the Grayscale #Bitcoin Trust private placement is available for eligible accredited investors to purchase shares at the Trust’s daily NAV. We accept investments in both cash and $BTC.”
According to Grayscale’s latest filing with the U.S. Security and Exchange Commission, the number of shares sold increased 90% from the first quarter of the year to the second, which equates to the fund issuing over 87 million shares.
It’s also worth noting that Grayscale shares are traded at a premium that fluctuates, and in July, it reportedly decreased to 10%. According to crypto technology company Amun AG, investors (likely retail) have bought Grayscale Bitcoin Trust shares over the last year at a market price 22% above its net asset value on average.
Therefore, dips in the premium could have invited arbitrage traders to step in and purchase the shares, suggesting another reason why Grayscale’s products are in high demand.
Lanre Jonathan Ige, a researcher at Amun AG, told Cointelegraph that the premiums exist “due to the lack of the ability to create shares on a daily basis (or redeem shares) like in the case of ETPs/ETFs.” He added:
“There’s untapped demand for Bitcoin in the US market from those with tax-advantaged accounts like retirement accounts whose only option in BTC (some may not properly even understand the drastic premium for GBTC) so they maintain the demand for GBTC which boosts the premium.
Smart investors are able to (of sorts) generate yields equal to the GBTC premium with knowledge the premium is unlikely to fall; or even hedge GBTC exposure by also shorting GBTC when they’ve created new shares.”
Institutional Trading Picking Up
Nevertheless, the exponential growth for institutional money flowing into Bitcoin and other digital assets can also be observed through other metrics, namely through the derivatives activity in the CME and Bakkt futures markets — both of which have recently posted record numbers both in open interest and volume.
Other options for institutional investors are also emerging everywhere. Lanre Jonathan Ige told Cointelegraph that the lack of viable options is one of the reasons for the aforementioned premiums, but new options are starting to appear:
“People don’t buy the native asset because many less sophisticated investors aren’t familiar with Coinbase/Kraken and want to invest through brokers they understand and keep the rest of their wealth in.
GBTC can be accessed through some brokers that have access to the OTCQX market. Buying Bitcoin through such a wrapper would allow an investor to benefit from many tax advantages in the same way investing in 21Shares’ suite of ETPs likely would.”
As Bitcoin continues to establish itself in the public eye as a more reliable asset class, awareness seems to be paying off. Grayscale fosters education for institutions by promoting Bitcoin to financial advisors along with many other strategies. Similarly, Fidelity has also dubbed Bitcoin as an insurance plan for economic turmoil, and Goldman Sachs recently stated that the Bitcoin price may rise alongside gold’s as demand for viable stores of value grows.
Not only is Grayscale promoting crypto education to financial advisors, it is also trying to bring crypto awareness to the masses, having recently debuted an advertising campaign on CNBC, MSNBC, FOX and FOX Business in order to “brrring crypto to the masses.”
The 30-second video ad, however, received heavy criticism from some in the Bitcoin community for not mentioning Bitcoin and focusing too much on the history of money rather than digital assets. Furthermore, some also criticized the mentioning of controversial forks like Ethereum Classic and Bitcoin Cash and even the quality of the ad itself.
In the midst of the ongoing pandemic and a depreciating dollar, it’s only a matter of time until we see a Bitcoin ETF that could be a real game changer for Bitcoin, according to Grayscale’s managing director, Michael Sonnenshein. For now, the closest thing to an ETF is the GBTC fund, which, if it were an ETF, it would be one of the most sought-after in the United States.
Grayscale Investments Enjoys Its Best Week Ever After National Ad Blitz
Grayscale Investments had its best fundraising week in history following an ad blitz on a number of major television networks. According to the company’s CEO Barry Silbert, Grayscale netted $217 million in investments in the days following the campaign.
The firm’s Bitcoin Trust Fund was the biggest contributor to the success, adding 14,422.01411512 Bitcoin (BTC) at a value of $167,932,466, according to an SEC filing. The firm is currently holding 409,131 BTC, essentially removing it from circulation.
Meanwhile, Galaxy Digital took out a full page ad in the Financial Times last week.
Grayscale Brings Altcoins To Over-the-Counter Trading
The company also happened to clear a Nasdaq and NYSE listing requirement in the process.
Grayscale Investments, the asset manager behind the world’s largest Bitcoin trust, announced that its Bitcoin Cash Trust and Litecoin Trust are eligible for deposit at the Depository Trust Company, the largest securities depository in the world.
The Depository Trust Company (often shortened to DTC) was founded in 1973 and is based in New York. It holds securities worth $54.2 trillion as of July 31, 2017.
By clearing the bar to deposit here, Grayscale also happens to meet a requirement for being listed on major stock exchanges like the New York Stock Exchange and the Nasdaq.
Grayscale announced on August 17 that shares from the firm’s Bitcoin Cash Trust will be available on over-the-counter, or OTC, markets under the BCHG ticker. The Litecoin Trust’s shares will use the ticker LTCN.
Grayscale’s Ethereum Trust Granted SEC Reporting Company Status
Grayscale Investments’ Ethereum Trust on Monday became a Securities and Exchange Commission (SEC) reporting company, a move that increases the trust’s transparency – and potentially its liquidity.
* The Ethereum Trust will begin regularly disclosing how much money is flowing through its passive ETH investment vehicle, according to SEC filings.
* Accredited investors who hold the trust will be able to sell after only a six-month lockup instead of the usual 12.
* “We’re seeing interest from investors who have become more comfortable with digital currencies through bitcoin exposure, and are now looking at how else they can diversify within the asset class,” said Grayscale’s managing director, Michael Sonnenshein.
* The trust is Grayscale’s second crypto vehicle with shares registered under the Exchange Act of 1934, after its Bitcoin Trust became effective as a reporting company in January.
* Grayscale is part of Digital Currency Group, CoinDesk’s parent company.
Grayscale Adds A ‘Cool $300M’ In A Day And $1B This Week
“Added a cool $300 million in AUM in one day,” boasts Grayscale CEO Barry Silbert.
Crypto fund manager Grayscale Investments has increased its assets under management (AUM) by $1 billion in the space of a week.
According to an update posted to Grayscale’s Twitter account on Oct. 22, the investment firm currently has $7.3 billion in assets under management (AUM). That’s a billion-dollar increase on the $6.3 billion AUM Grayscale reported on Oct. 15. Each report is delayed by 24 hours so it refers to the previous day’s figure.
The funds are mostly held in Grayscale’s trusts for Bitcoin (BTC) and Ethereum (ETH), along with the firm’s digital large cap fund. The most recent spike is likely linked to the surge in crypto market prices following the recent news PayPal would offer crypto payments from 2021.
Grayscale reported its Litecoin (LTC) Trust had increased the most since the previous day’s report, by more than 7.5%. The company’s Zcash (ZEC) Trust increased by more than 6% in the same period. The firm also has small allocations in Ethereum Classic (ETC), Horizen (ZEN), Stellar Lumens (XLM), XRP, and Bitcoin Cash (BCH).
Grayscale CEO Barry Silbert commented on the investment firm’s recent rise on Twitter, stating it had “added a cool $300 million in AUM in one day.”
Added a cool $300 million in AUM in one day https://t.co/G2lKu6QqxI
— Barry Silbert (@BarrySilbert) October 22, 2020
With Grayscale’s Bitcoin Trust currently holding more than $6B assets under management, this effectively means the investment firm controls roughly 2.5% of the total coin supply — currently at 18,522,937 according to CoinMarketCap. The total supply of Bitcoin is capped at 21 million, meaning there are roughly 2.5 million BTC left to be mined, or about 11.9% of the total Bitcoin to be generated.
Grayscale has recently be joined by other major financial institutions that also see the potential of crypto. Along with MicroStrategy’s purchase of $415 million BTC this year, monitoring resource Coin98 Analytics reported digital asset manager CoinShares controlled 69,730 BTC as of last week — worth more than $900 million following the coin’s surge past $13,000 today.
BlockFi Takes 5% Stake In Grayscale’s $4.8B Bitcoin Trust
Crypto lender BlockFi has become one of Grayscale Bitcoin Trust’s (GBTC) biggest whales.
* BlockFi holds 5.07% of Grayscale’s $4.8 billion bitcoin trust, or 24,235,578 GBTC shares, according to Tuesday Securities and Exchange Commission (SEC) filings. Grayscale is owned by CoinDesk’s parent firm Digital Currency Group.
* CEO Zac Prince said in a press statement BlockFi’s “significant” GBTC position will “add value” to the “marketplace for liquid and illiquid” shares. “There are lending markets related to GBTC,” he told CoinDesk in an email.
* Crypto fund manager Three Arrows Capital is the only other entity with comparable GBTC holdings, having amassed over 21 million shares by June. That represented a 6.26% stake in GBTC at the time.
* Entities are required to publicly disclose ownership positions over the 5% threshold. GBTC became an SEC reporting company in January.
Grayscale Trust Sees Largest-Ever Weekly Inflow, Nears 500K BTC In Total
Grayscale is on track to control 5% of the entire Bitcoin circulating supply by the end of 2021 with a record $215 million inflow last week.
Grayscale’s Bitcoin (BTC) Trust is on track to reach 500,000 BTC by the end of 2020.
Last week, Grayscale saw a record inflow of $215 million (15,907 BTC) that surpassed all previous investments into the Trust.
The firm now holds $6.7 billion (481,711 BTC) as of the time of writing.
Should the firm continue last month’s growth-rate of 32,000 BTC, Grayscale in on track to hold 500,000 BTC (2.7% of circulating supply) within three weeks. By the end of next year, if the rate is consistent, Grayscale could control 926,600 BTC — equal to 5% of Bitcoin’s total current supply.
The Trust, created in September 2013, has seen explosive growth this year, with its assets under management (AUM) growing from $1.9 billion to $4.7 billion in the first nine months of 2020. Since Grayscale’s Q3 report, the AUM of its Bitcoin Trust has grown by an additional $2 billion.
Almost 70% of Grayscale’s total weekly inflows were invested into its Bitcoin Trust over the past three quarters. Bitcoin Trust weekly inflows grew from a 12-month average of $39.5 million to more than $55 million in Q3, 84% of which was attributed to institutional investors.
Last week, Grayscale published its second Bitcoin Investor Study in which the firm found U.S. investors that were interested in investing in BTC had grown from 36% in 2019 to 55% in 2020.
Grayscale holds vastly more Bitcoin than any other listed company (although a fund isn’t directly comparable with a company holding BTC as a reserve asset). As of Oct 13th, the remaining 12 companies combined hold approximately 150,000 BTC with notable holdings from Microstrategy (38,250 BTC), Mike Novogratz’s Galaxy Digital (16,551 BTC), and Jack Dorsey’s Square (4,709 BTC).
Grayscale Now Holds Half A Million Bitcoin
Grayscale’s Bitcoin Trust now holds more than 500,000 Bitcoin, surpassing $8.3 billion in value.
Cryptocurrency fund manager Grayscale Investments now holds more than 500,000 BTC in its Bitcoin Trust.
According to a Nov. 16 post, Grayscale now holds to $8.35 billion worth of Bitcoin — equating to 2.69% of Bitcoin’s (BTC) outstanding supply and market cap.
But with Chainalysis estimating that around 3.7 million BTC have been lost, Grayscale may actually now be in possession of 3.37% of Bitcoin’s remaining circulating supply
Appealing to institutional investors who are prepared to pay a premium to buy and hold cryptocurrency through the security of a regulated fund, shares in the Grayscale Bitcoin Trust currently represent $15.62 worth of Bitcoin each, yet change hands for $18.86. This equates to nearly a 19% premium. Grayscale also charges an annual fee of 2%.
The Grayscale Bitcoin Trust has aggressively accumulated Bitcoin during 2020, with the amount of BTC held by the fund increasing almost 50% in the past six months. That’s a steep rise in 2020 for a fund that launched seven years ago, and suggests snowballing institutional interest.
Last week, the fund reported its largest-ever weekly inflow, taking in 15,907 BTC worth $215 million.
Grayscale’s Ethereum Trust also ramped up its purchases during 2020, and now holds roughly $1.175 billion worth of Ether (ETH), or 2.24% of ETH’s entire capitalization.
Grayscale’s eight other crypto funds currently manage nearly $400 million worth of assets, bringing the total value of digital assets managed by the firm to $9.9 million.
Grayscale Dusts Off Their #Dropgold Campaign With Fresh Ad Push
The ad is currently running online and on several major tv networks.
Digital asset manager Grayscale is bringing back its controversial “drop gold” campaign just in time for the potential Bitcoin (BTC) bull market.
CEO Barry Silbert tweeted Tuesday that the 30-second advertisement will be “running on major networks all over the country.”
The commercial implores investors to “leave the pack behind” by dropping gold and adding digital assets like Bitcoin to their portfolio.
“In a digital world, gold shouldn’t weigh down your portfolio,” the commercial says, adding:
“Digital currencies like Bitcoin are the future. They’re secure, borderless and, unlike gold, they actually have utility.”
Grayscale launched its #dropgold campaign in May 2019 when Bitcoin was trading at roughly $5,400. At the time, few institutional investors had come out publicly in favor of digital assets.
Times have certainly changed.
Since that time, institutions like JPMorgan, Deutsche Bank, Citigroup and Guggenheim have expressed varying degrees of interest in cryptocurrencies.
JPMorgan and Deutsche Bank have reportedly stated that institutional investors are shifting some of their allocations away from gold and into Bitcoin.
In the case of Citigroup, managing director Tom Fitzpatrick has seemingly forecast a $318,000 BTC price in the next 12 months.
Meanwhile, Guggenheim has filed an amendment with the U.S. Securities and Exchange Commission to allocate $500 million to Grayscale’s GBTC.
As Cointelegraph Magazine reported in Aug 2019, Grayscale’s #dropgold campaign could introduce millions of people to Bitcoin, much in the same way that Merrill Lynch’s 1948 New York Times ad introduced boomers to stocks.
Gold is coming off its worst month since 2016, all while Bitcoin recorded its highest monthly close on record. Currently, one Bitcoin buys you 10.539 ounces of gold, the highest in almost three years.
Institutions Rushing Into $19K Bitcoin As GBTC Premium Hits 6-Month High
Grayscale Bitcoin Trust’s premium is now above 30% as institutional demand for BTC continues to increase.
The demand for the Grayscale Bitcoin Trust (GBTC) continues to rise with its premium surpassing 30% on Dec. 3. This indicates that Bitcoin (BTC) is seeing increasing institutional demand as its price consolidates above $19,000.
The Grayscale Bitcoin Trust is an institutional vehicle that is tradable in the United States through over-the-counter markets. Accredited and institutional investors typically use the trust to obtain exposure to BTC with their brokerage accounts.
Why Is The Grayscale Bitcoin Trust Premium Rising?
The Grayscale Bitcoin Trust is the go-to institutional vehicle in the U.S. for BTC due to the lack of a Bitcoin exchange-traded fund (ETF).
Other markets, like Canada, have a Bitcoin ETF that investors can use to gain exposure to BTC. Without an ETF, institutions in the U.S. turn to alternative vehicles, like the Grayscale Bitcoin Trust, to invest in BTC.
Each share of the trust represents 0.00095346 BTC. Hence, buying one share of the Grayscale Bitcoin Trust is like buying 0.095% of one Bitcoin.
As of Dec. 3, GBTC is trading at $23.39 across retail and spot markets, Bitcoin is trading at around $19,250, which makes 0.095% of 1 BTC worth around $17.33. This means that GBTC is roughly 35% more expensive than buying Bitcoin at the current market price.
On Dec. 3, the price of Bitcoin increased from $19,000 to $19,250 after the U.S. market closed. When that difference is deducted, the current premium of GBTC is around 25% to 30%. Notably, this is the highest level since June when the BTC market price was around $9,600 prior to rallying higher.
Grayscale itself does not charge the premium, however. The market prices in the premium as it trades in a public market in the United States. When the premium rises, it signifies that more institutions and accredited investors are accumulating BTC via GBTC.
Although the current premium is rising, it is still relatively low compared with 2017. This suggests that the rally of Bitcoin still has a lot more room to run. When GBTC’s premium increases, it typically signifies a bullish trend and an overall increase in investor appetite for BTC.
Consequently, the amount of Bitcoin owned by Grayscale has increased substantially in recent months. Currently, Grayscale owns $10.19 billion in BTC, according to its latest report. What’s more, Grayscale bought twice as much Bitcoin than was mined in November.
Institutions Are Propelling BTC’s Rally
Atop the continuous increase in demand for Bitcoin on Grayscale, Travis Kling, a fund manager at Ikigai, found similarities between BTC’s past intraday price spikes and the entrance of new institutions.
Kling cited a chart that marks when major institutions — such as JPMorgan Chase, Citibank, Blackrock and Guggenheim — spoke positively about BTC, which was seemingly followed by more upside for BTC price. On Dec. 1, he said:
“I call this chart ‘The Traditional Onslaught’. We’ve been talking about ‘The Herd’ for 3+ years. The Herd requires career risk cover. This is that. They are by definition not early adopters, but their pockets are deep & their capital is sticky. #Bitcoin is just getting started.”
Unlike previous bull cycles, institutions are now more actively involved in the current Bitcoin rally. The clash between institutions accumulating BTC and whales selling might have furthered fueled the extreme volatility in the market.
In the past several days, Bitcoin has been recording wild price swings within a matter of hours after getting rejected by $20,000. This has also led analysts to have mixed opinions on where BTC is heading next, as Cointelegraph previously reported.
At the same time, several indicators suggest that Bitcoin may be on the verge of breaking $20,000 sooner rather than later.
Bitcoin Whales Selling To Institutions As Grayscale Adds 7,188 BTC In 24 Hours
A huge sell wall at $20,000 may see a major transfer of wealth from whales to institutions based on current data.
Bitcoin (BTC) whales appear to be selling to institutions as the supply squeeze tightens below $20,000.
Data from various sources shows that while more BTC returned to exchanges this week, large-scale buyers are still creating more demand than supply can meet.
Exchange inflows and Grayscale buy-ins
Statistics from on-chain analytics service Coin98 confirmed that investment giant Grayscale bought twice as much Bitcoin as miners could create in November.
Together with Square and PayPal, the other major corporate actors requiring more and more BTC stocks, Grayscale is creating a supply imbalance to which price gains are the only logical outcome.
This scenario set the stage for December with Grayscale continuing its buying of Bitcoin, totaling over 7,000 BTC in just 24 hours as its Bitcoin Assets Under Management now exceed 10.5 billion as of Dec. 4.
Simultaneously, this week saw Bitcoin break all-time highs and challenge $20,000, only to encounter massive selling pressure.
Having bounced off lows of $18,100 and returned to circle $19,000, BTC/USD looks primed for another test of the seminal level, but selling dynamics remain unusual. With sell walls at $20,000 still firmly in place, longtime hodlers and whales looking to exit have reliable buyers in the form of Grayscale and other institutions.
Evidence points to increasing inflows from whales to exchanges this week, something which coincided with the $20,000 attempt. Should selling already be keeping prices down, BTC should thus be finding its way from whales to the stronger hands of Grayscale and its clients.
CNBC: The Wealthy Are “Loading Up” On Bitcoin
The phenomenon has even caught the attention of mainstream media.
“Total accounts buying more than $1 million worth of Bitcoin and then moving it off of exchange has skyrocketed,” CNBC reported on Thursday.
“That’s up 180% from 2017 to this year. Analysts say that signals wealthy investors are loading up on Bitcoin and then storing it offline to store somewhere a little more secure.”
At the same time, total Bitcoin addresses in profit versus when coins were placed in them hit new record highs on Friday, according to the latest data from Glassnode.
On Wall Street, meanwhile, news on Thursday came that Bitcoin and hundreds of altcoins would compose new cryptocurrency indexes by S&P Dow Jones Indices from January 2021.
Grayscale Sees A New Group Of Ethereum-First Investors
While bitcoin was the first stop for most investors before this year, a growing number of people are paying attention to Ethereum in its own right in 2020, Michael Sonnenshein, managing director at Grayscale Investments LLC, said.
“Over the course of 2020 we are seeing a new group of investors who are Ethereum-first and in some cases Ethereum-only,” Sonnenshein said in an interview with Bloomberg. “There’s a growing conviction around Ethereum as an asset class.” Grayscale is owned by CoinDesk’s parent company, Digital Currency Group.
DeFi has given Ethereum a significant boost since this summer and the blockchain kicked off its journey to Eth 2.0 after launching its beacon chain earlier this month.
“The development of the asset class has continued to solidify itself,” Sonnenshein said. “Ethereum has along the same lines of the staying power bitcoin has.”
There have been a wide range of opinions on whether Ethereum’s native currency, ether (ETH), would become an even more contentious competitor to bitcoin as an asset class.
“For institutional investors, they are buying bitcoin for the digital gold narrative,” Ryan Watkins, senior research analyst at Messari, previously told CoinDesk. “Ether just isn’t in that conversation yet.”
Ether “benefits from spillover and likely has more conversation around it from crypto-natives,” Vishal Shah, founder of derivatives exchange Alpha5, said in an earlier interview with CoinDesk. “For the uninitiated, [it is] hard to see how bitcoin is not the sole on-ramp.”
If Ethereum gets more investors’ attention as an asset class, it would be for very different reasons. The blockchain strives to be the “world computer” that provides an inclusive ecosystem for decentralized applications whereas bitcoin has been treated as an emerging asset class.
“I’ve always thought this digital asset space is huge – and it’s not just bitcoin – because there are going to be different applications for different things,” Raoul Pal, CEO and co-founder of financial media group Real Vision, said in his recent documentary. “I think of the two [bitcoin and ether] as having a very nice combined asset allocation.”
Grayscale Now Has $13B In Crypto Assets Under Management
Digital asset manager Grayscale Investments has passed another milestone, reaching $13 billion in assets under management on Dec. 14 for the first time.
* Data tweeted by the firm showed the largest holdings remain in bitcoin, with the Grayscale Bitcoin Trust having $10.82 billion in the top crypto asset. The firm’s Ethereum Trust now has $1.72 billion in AUM.
* Grayscale also has trusts for litecoin ($74.8 million), bitcoin cash ($58.6 million), ethereum classic ($74.3) and others with less significant holdings including XRP, stellar lumens and zcash.
* The Ethereum Trust recently added another 131,455 ether, which was valued at $74 million on Dec. 10, according to an SEC filing.
* Michael Sonnenshein, managing director at Grayscale Investments, told Bloomberg in a recent interview, “Over the course of 2020 we are seeing a new group of investors who are Ethereum first and in some cases Ethereum only. There’s a growing conviction around Ethereum as an asset class.”
* New York-based Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.
Grayscale Temporarily Stops Accepting New Clients In Six Crypto Trusts
Grayscale Investments LLC has temporarily stopped accepting new investors in six funds, including its Ethereum Trust and Bitcoin Trust funds, both gateways for institutional crypto bets.
* The crypto asset manager’s website said Monday that its Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin and Digital Large Cap Fund Trusts are “currently unavailable” for new investors.
* Grayscale periodically closes off its crypto trusts to so-called “private placement” rounds. Such action happened repeatedly to GBTC in Q4 2019 – so the Monday halting is not unusual.
* Even with the temporary closing to new investors, Grayscale will still be able to obtain added capital from existing investors until it reopens again to new investors. On Monday JPMorgan analysts wrote that a dramatic slowdown in GBTC inflows could jack up the odds of a bitcoin (BTC, -5.62%) price correction.
* New York-based Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.
A Slowing Of Grayscale Bitcoin Fund Inflows Could Prompt Price Correction: JPMorgan
JPMorgan strategists have said the odds of a bitcoin correction would rise if flows into the Grayscale Bitcoin Trust slow down dramatically.
* Such a drop in flows into the largest bitcoin (BTC, -5.62%) fund would increase the likelihood of a price correction similar to the one seen in the second half of 2019, according to a note from the bank’s quantitative strategists led by Nikolaos Panigirtzoglou, as reported by Bloomberg Monday.
* The digital asset manager’s bitcoin inflows “are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics,” the strategists said.
* They stopped short of saying bitcoin is overbought after the cryptocurrency soared to consecutive record highs in recent weeks.
* The most recent data tweeted by Grayscale Investments showed the firm reached $15.5 billion in cryptocurrency assets under management on Dec. 18 – up $2 billion in less than a month. Its Bitcoin Trust is now worth over $13 billion of that total.
* Bitcoin hit a new record price of $24,273 on Sunday. At the time of publication, prices were lower at around $23,450.
* New York-based Grayscale is owned by Digital Currency Group, the parent company of CoinDesk. The firm allows institutional investors to buy shares in its crypto trusts, gaining exposure to the asset class without having to own the asset directly.
Bitcoin Price Drops To $23K In Minutes Despite Huge New Grayscale Buy-In
Grayscale adds 50% of miners’ monthly block reward tally in a single day, but price action stays decidedly weak.
Bitcoin (BTC) fell by almost $1,000 in under an hour on Dec. 23 as spot markets refused to buy fresh good news from institutional investors.
BTC Price Spooked Near $24,000 Sell Wall
Data from Cointelegraph Markets, Coin360 and TradingView showed a surprise bearish trading session for Bitcoin on Wednesday, which hit local lows of $22,800.
It took less than 60 minutes for BTC/USD to descend from highs of $23,718, reaffirming volatility as a feature of the current landscape as well as the selling pressure surrounding $24,000.
At press time, the pair circled $23,000 as the market took a brief respite to determine direction before Wall Street opened.
Grayscale Adds $284 Million Of BTC In One Day
The move contrasts with bullish accumulation continuing from institutional quarters, with Grayscale adding more BTC to its assets under management on Tuesday than the entire previous week combined. That week-long accumulation, although lower, still witnessed a new all-time high for Bitcoin.
Grayscale added 12,319 BTC ($284.5 million) on Tuesday, while last week’s tally was 11,512 BTC ($266.1 million). For context, Bitcoin miners are currently able to release around 28,000 BTC per month in block rewards.
“Bad news for Bitcoin bears,” analyst Kevin Rooke commented on Grayscale’s continued commitment to Bitcoin buy-ins.
As Cointelegraph reported, MicroStrategy, which now owns over 70,000 BTC, reportedly did not move the market with lump-sum buying last week when it upped its reserves by $650 million.
Grayscale Has $19B In Crypto Assets Under Management, Up From $16.4B Last Week
Digital asset manager Grayscale Investments has passed another milestone, reaching $19 billion in assets under management (AUM) on Dec. 28, up from the $16.4 billion announced last week.
* The latest data tweeted by Grayscale Investments showed its largest holdings by far are in bitcoin, with the Grayscale Bitcoin Trust having $16.3 billion in the top crypto asset. The firm’s Ethereum Trust now has $2.1 billion in ether AUM.
* Grayscale also has trusts for litecoin ($151.3 million), bitcoin cash ($85.5 million), ethereum classic ($72.9 million), and others with less significant holdings including XRP, XLM and zcash.
* New York-based Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.
Bitcoin Supply Squeeze Heats Up As Grayscale Buys Nearly 3x The BTC Mined In December
Grayscale brings its total assets under management above $20 billion in time for the start of 2021 as BTC demand intensifies.
Institutional crypto investment giant Grayscale now has $20 billion under its control as its Bitcoin (BTC) buys outstrip production by almost three to one.
As noted by data analysis resource Coin98 Analytics on Jan. 1, Grayscale bought almost three times more BTC than that which was added to the market in December 2020.
It’s Official: Miners Can’t Produce Enough Bitcoin
Last month, the company added a total of 72,950 BTC ($2.132 billion) to its assets under management (AUM). During the same period, miners generated just 28,112 BTC ($821.7 million) — 38.5% of Grayscale’s buy-in.
The figures underscore what many have described as an ongoing liquidity squeeze in Bitcoin, where large buyers suck up any available supply and remove it from circulation, sending it to cold storage for long-term hodling.
As Cointelegraph reported, the phenomenon was already visible in November, but December saw a clear increase in demand from Grayscale and other institutional entities.
Grayscale Now Controls $20 Billion In Crypto
As the clock chimed midnight on New Year’s Eve, meanwhile, Grayscale CEO Barry Silbert celebrated bringing the company’s total AUM across its various crypto funds to over $20 billion. Just one year ago, the figure stood at a mere $2 billion.
The company remains the largest institutional player on the Bitcoin scene, with its $17.475 billion in BTC far outstripping any other market participant. Newcomer MicroStrategy, while not an investment business, now controls 70,470 BTC ($2.06 billion).
Going forward, analysts predict that more demand for the fixed supply of “new” bitcoins from miners will only serve to create a bidding war and push up the price. Sellers already faced stiff resolve from buyers in December, when new all-time highs failed to produce significant long-lasting pullbacks.
Grayscale Holds Over 3% of Bitcoin, Sees Pension Interest
Grayscale Investments LLC’s new chief executive officer says the world’s largest manager of digital assets expects increased interest from institutional investors such as pension funds and endowments to continue to fuel its rapid growth.
The Grayscale Bitcoin Trust has become a bellwether for digital asset investors after accumulating more than 3% of the total supply of the largest cryptocurrency.
“We’ve started to see participation not just from the hedge fund segment, which we’ve long seen participation from, but now it’s recently from other institutions, pensions and endowments,” Michael Sonnenshein, who was named successor to founder Barry Silbert on Thursday, said in an interview. “The sizes of allocations they are making are growing rapidly as well.”
Grayscale has 10 funds and currently manages $25 billion in assets, up from $2 billion a year ago, Sonnenshein said. The Bitcoin trust has seen the majority of the inflows amid a rally that pushed Bitcoin to $40,000 on Thursday for the first time.
Grayscale is planning to double its current staff of 24 employees, to continue to invest in advertising and to introduce half a dozen new products this year, Sonnenshein said.
Grayscale’s funds operate as trusts that hold growing hoards of coins such as Bitcoin that are not redeemable by investors. Holders can sell their shares in most of the trusts in the secondary market. Grayscale Bitcoin Trust’s success may potentially be impacting Bitcoin’s supply, Sonnenshein said.
“So there is definitely an argument to be made about Grayscale and really any other vehicle that may be removing Bitcoin from circulation and putting it into a financial product inherently increasing the scarcity of an already scarce asset,” Sonnenshein said. “This is a verifiable scarce asset and so when there are mechanisms that are removing them from circulation, that’s inherently making it an even scarcer asset.”
Sonnenshein joined New York-based Grayscale in 2014, and most recently was its managing director. Prior to Grayscale, he was an associate at JPMorgan Chase & Co. and an analyst at Barclays Plc. Silbert will continue as chief executive of Grayscale parent, Digital Currency Group.
Grayscale Reopens Crypto Trusts For Investment As Bitcoin Price Climbs
The fund manager had temporarily stopped taking on new investors in late December but has now resumed for almost all crypto trusts.
Digital asset investment manager Grayscale has resumed accepting new investments into almost all of its cryptocurrency trusts. The investment manager had paused new inflows into six of its trusts in late December 2020, just as the six-month lock-up period for selling recently-purchased shares in its Bitcoin Trust, which trades under the ticker GBTC, was winding up.
As of the time of writing, products such as the Grayscale Bitcoin Trust and the Grayscale Digital Large Cap Fund Trust are all available for new investors, although the Grayscale Ethereum Trust remains unavailable. The Grayscale XRP Trust is inactive, and will likely remain so. In early January, the fund manager had liquidated its holdings of the asset shortly after news broke of a major lawsuit filed by the United States Securities and Exchange Commission against Ripple.
Grayscale periodically halts and resumes new investor inflows into its funds; during these periods of closure, the funds remain open for private placement funds. As well as this, all investors in the Grayscale crypto trusts are subject to a six-month lock-up period for newly-purchased shares, after which they are free to sell the shares on the open market to non-accredited investors.
Crypto investors keep a close eye on action from Grayscale, which has evolved into the world’s largest cryptocurrency asset manager. As of Jan. 11, Grayscale has $24.5 billion assets under management across its various crypto funds. In early January, Cointelegraph reported that Grayscale’s purchases of Bitcoin were outstripping the minting of new coins by a factor of three, capping a year of aggressive accumulation by the fund manager.
Bitcoin is up close to 10% on the week, trading at $35,833 as of press time. With new investments now open, the six-month lock-up period begins afresh. Some analysts have alleged that when this period draws to a close, the Bitcoin spot market is driven higher as shares in Grayscale’s GBTC hit the open market.
Grayscale Investments Liquidates All Of Its XRP… While It Still Can
Grayscale is dissolving its XRP Trust and will distribute cash to investors after liquidating all XRP held by the trust.
Institutional crypto-fund manager Grayscale Investments has begun the dissolution of its XRP Trust in response to the Security and Exchange Commission’s December 2020 lawsuit alleging the XRP token is a security under U.S. law.
According to an announcement published Wednesday, Grayscale decided to dissolve the trust in response to the spate of XRP delistings from major crypto-asset exchanges after the SEC’s complaint was filed.
“It is likely to be increasingly difficult for U.S. investors, including the Trust, to convert XRP to U.S. dollars, and therefore continue the Trust’s operations.”
All XRP held by the trust has already been liquidated, with Grayscale intending to distribute the net cash proceeds to XRP Trust shareholders after deducting expenses. The trust will be terminated following the distribution of said cash.
Despite the SEC’s hardline position on XRP, regulators in other countries are not convinced the token comprises a security.
A January report on cryptocurrency regulation published by the U.K. Treasury classified XRP as an “unregulated token” alongside leading digital assets Bitcoin (BTC) and Ether (ETH), with the Treasury describing unregulated tokens as “neither e-money tokens nor security tokens.”
The report describes XRP primarily as an “exchange token” — a token that is “primarily used as a means of exchange.”
On Wednesday, Japan’s Financial Services Agency told The Block it classifies XRP as a cryptocurrency, not a security.
XRP is currently trading for $0.31 and is down 40% in the past 30 days.
Grayscale Inflows Hit $3.3B In Record-Breaking Fourth Quarter
Average weekly inflows into Grayscale’s products hit $250.7 million in the fourth quarter, capping off a stellar year for the asset manager.
Institutional investors continued to pile into Grayscale products in the fourth quarter, highlighting the continued urgency for exposure to Bitcoin (BTC) and Ethereum (ETH)
Total investments into Grayscale’s family of products reached $3.3 billion in the final quarter of 2020, which translated into average weekly inflows of $250.7 million, the digital-asset manager reported Thursday. That’s a threefold increase from the third quarter when Grayscale products raked in $1.05 billion.
Grayscale’s Bitcoin Trust generated $217.1 million in average weekly inflows. The Ethereum Trust saw an average of $26.3 million in new capital invested.
Ninety-three percent of new investments came from institutional investors, with asset managers accounting for the largest share, according to Grayscale. That’s a nine percentage point increase from the third quarter when institutions accounted for 84% of new capital.
In all of 2020, investments into Grayscale products totaled $5.7 billion. That’s more than four times the cumulative inflow between 2013 and 2019.
Grayscale’s data reflect a turning point for Bitcoin in 2020, as smart-money investors began to view the digital asset as an inflationary hedge and long-term store of value. That narrative helped propel Bitcoin to a price of nearly $42,000 in early January after more than doubling in just three weeks.
Institutional adoption of Bitcoin has put the asset on a path to maturity, according to Goldman Sachs executive Jeff Currie. However, he acknowledged that Bitcoin still has a long way to go before it’s considered an institutional-grade asset.
The bull market could be given added impetus in the coming weeks as the incoming Biden administration prepares a multi-trillion-dollar stimulus program. The considerable devaluation of the U.S. dollar is pushing more investors into Bitcoin.
Bitcoin Fee Wars Erupt As Upstart Targets Grayscale’s Billions
The fledging world of cryptocurrency funds is set to welcome a bold new entrant.
The Osprey Bitcoin Trust (ticker OBTC) will launch in the over-the-counter markets with a 0.49% management fee, according to the Osprey Funds website. Fidelity Digital Assets will provide custody services.
OBTC’s fee is roughly a fourth of the cost of its main rival, the $28 billion Grayscale Bitcoin Trust (ticker GBTC), which charges 2%. Demand for products such as GBTC has skyrocketed as Bitcoin’s dizzying rally reached all-time highs above $40,000.
That frenzy sent more than $3 billion of inflows into Grayscale Investments products in the fourth quarter, the bulk of which was absorbed by GBTC, the company said. Osprey is likely trying to capture some of that market share by undercutting GBTC’s fee, according to Bloomberg Intelligence.
“I would say they are definitely going after GBTC here,” BI analyst James Seyffart said. “At current asset levels, Grayscale is pulling in around $469 million per year from GBTC. It was only a matter of time before someone went after that.”
It’s a mirror of what’s taken place in the $5.6 trillion exchange-traded fund industry, where cutthroat competition for assets has taken fees on some of the most-popular ETFs to near-zero levels. In June, BlackRock Inc. lowered the expense ratio of its biggest ETF — the $239 billion iShares Core S&P 500 ETF (ticker IVV) — to just 0.03% in order to match a rival fund from Vanguard Group.
“We are always happy to see digital currency access products enter the market, especially here in the U.S.,” said Michael Sonnenshein, chief executive officer of Grayscale Investments. “We strive to offer products that are familiar to investors, fit within their regulatory framework and are supported by best-in-class service providers.”
Demand for anything in a crypto wrapper has been so strong that investors poured into the likes of GBTC and the Bitwise 10 Crypto Index Fund (ticker BITW) even as their prices soared above the value of their underlying holdings. BITW has already gathered over $500 million in assets after launching in early December, according to data compiled by Bloomberg.
In the absence of a Bitcoin ETF — which U.S. regulators have yet to approve — buying shares of GBTC and BITW is seen as one of the easiest ways for investors to get Bitcoin exposure without having to sign up for a crypto exchange or create a digital wallet. The Osprey website touts OBTC as a way to get “exposure to Bitcoin in a qualified IRA or brokerage account.”
Accredited investors face a $25,000 minimum to buy directly into the trust. Shares have a lock-up period of one year before they can be sold in the secondary market. The company anticipates it will begin the process of trying to reduce that period to six months, according to Greg King, chief executive officer of Osprey Funds, a subsidiary of Fairfield, Connecticut-based REX Shares.
“We’re committed to a low-cost product and to best-in-class service providers and we’re excited to offer investors a new alternative in the exchange-traded Bitcoin fund space,” King said in an interview.
Grayscale Raises $700M+ In A Day, Its Largest Daily Asset Raise Ever
In Q4 2020, the company raised $3.3 billion across its cryptocurrency investment vehicles.
Michael Sonnenshein, CEO of digital asset manager Grayscale Investments, tweeted the firm raised more than $700 million on Jan. 15 seeing increased momentum from Q4.
* In Q4 2020, the company raised $3.3 billion across its cryptocurrency investment vehicles, a record for the digital asset manager and further evidence of this rally’s institutional base.
* The Grayscale Bitcoin Trust, which is the company’s most popular product, led the pack in Q4 with an average of $217 million raised every week.
* The latest data from Grayscale shows on Jan. 15 the firm has a record $27.1 billion under management; it entered 2020 with just $2 billion.
* Eric Balchunas, senior ETF analyst at Bloomberg, compared Grayscale as the “ARK” of crypto via Twitter explaining that there are a number of similarities with both defying trends and seeing increased interest.
* “The similarities are pretty amazing. I think both hung in relative oblivion for 3-4 yrs, had like $2b 12mo ago ago and then boom, 10x increase. Both defy trends: ARK w stock picking and grayscale w very high fees and 20%+ premiums,” said Balchunas.
* ARK Investment Management, an asset-management firm led by Cathie Wood has a flagship ARK Innovation ETF (ARKK) which over the course of a year has returned more than 171%, seeing its assets under management by more than tenfold, to $21.8 billion.
* New York-based, SEC-regulated Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.
Grayscale Holds The Key To Bitcoin Hitting $40K, Says JPMorgan
The BTC price is at a crucial inflection point, according to JPMorgan strategists.
Grayscale Investments, the world’s largest digital-asset manager, could hold the key to Bitcoin’s (BTC) short-term price outlook, according to JPMorgan Chase.
As Bloomberg reports, strategists led by Nikolas Panigirtzoglou believe Bitcoin could lose its luster over the short-term unless it can “break out” above $40,000. The flagship cryptocurrency breached that key level on two occasions this month, once in the lead-up to new all-time highs near $42,000 and the other just last week.
The strategists determined that the Grayscale Bitcoin Trust, which currently has $23 billion in assets under management, will play a crucial role in whether BTC returns to that level or not.
“The flow into the Grayscale Bitcoin Trust would likely need to sustain its US$100 million per day pace over the coming days and weeks for such a breakout to occur.”
If BTC fails to re-take $40,000, trend-following traders “could propagate the past week’s correction,” the analysts said. That means the path of least resistance could be lower.
Since breaching $20,000 in December, the Bitcoin price more than doubled in just three weeks. The digital currency has been rangebound in recent weeks as traders look for the next major catalyst.
In the meantime, Grayscale continues to exert considerable influence over the cryptocurrency market. Average weekly inflows into Grayscale’s digital-asset products reached $250.7 million in the fourth quarter, marking a new all-time high. The Bitcoin Trust generated $217.1 million in weekly inflows, on average.
As Cointelegraph reported last week, Bitcoin’s price rose sharply after Grayscale reopened its services to new investors on Jan. 13.
‘Pay Attention’ — Grayscale Adds 18X The Bitcoin Mined Supply In One Day
Bitcoin worth $600 million gets taken off the market as BTC/USD struggles to cement support for a retest of $40,000.
Asset manager Grayscale added 18 times more Bitcoin (BTC) than miners added to the supply in just one day on Jan. 18.
As various data sources confirm, Grayscale, which remains the biggest institutional buyer in the Bitcoin space, purchased a total of 16,244 BTC ($607 million) on Monday.
BTC Buys Accelerate Again
The giant sums are some of the biggest on record and are an order of magnitude above what even Grayscale was attempting just last week. The company previously saw daily buys but stopped over the holiday period and reduced its allocations in the first week of the new year.
Monday’s activities bring its total assets under management (AUM) to almost $23 billion. As Cointelegraph reported, the total increased tenfold during 2020.
“Grayscale were buying $251 M of #Bitcoin on avg per week in Q4 2020,” Danny Scott, CEO of United Kingdom-based cryptocurrency exchange CoinCorner, tweeted.
“Last week they did $700 M in 1 day… And today $590 M… Pay attention.”
Unashamedly Bullish On Bitcoin
The move underscores both Grayscale’s continued faith in Bitcoin as a long-term play and that of institutions choosing Bitcoin over any other form of macro asset.
Despite mixed messages from fellow asset manager Guggenheim, set to begin its BTC exposure this month, industry sources state that public announcements hide the true extent of institutional involvement.
“There is huge institutional demand and most of it is silent,” Gemini exchange co-founder Tyler Winklevoss said last week while berating gold bug Peter Schiff for claiming that players were actually not interested in Bitcoin.
Data from on-chain analytics resource CryptoQuant meanwhile reveals changes in Grayscale’s buying habits, with late 2020 seeing the largest short-term increase in BTC holdings for the year.
Earlier, analysts at JPMorgan argued that inflows into the Grayscale Bitcoin Trust would need to maintain $100 million per day in order for Bitcoin to have a chance at reclaiming $40,000 price levels.
Grayscale CEO Outlines 6 Themes That Will Shape Crypto Market In 2021
Widespread institutional adoption, favorable regulation, and the growth of North American crypto mining are just some of the themes Michael Sonnenshein believes will materialize in 2021.
Michael Sonnenshein, the newly appointed CEO of Grayscale Investments, believes 2021 will mark another pivotal year for digital-asset investing as institutional capital and nation-state adoption drive the next leg of the bull market.
In a keynote address at this year’s virtual CFC St. Moritz Conference, Sonnenshein identified three key investment themes that underpinned Bitcoin’s (BTC) dramatic breakout in 2020. They were: macroeconomic uncertainty and quantitative easing; legendary investors and brand-name companies investing in BTC; and the continued strengthening of regulatory frameworks around digital assets.
Sonnenshein believes 2021 will see a continuation of these trends as more investors diversify into Bitcoin and other digital assets. He also identified several others that could shape the digital currency market in the near future.
According To Sonnenshein, The Six Themes That Investors Should Look For In 2021 Are:
* Decreased Career Risk Associated With Digital-Asset Investing
* Growing Interest Among Financial Advisers
* The Growth Of North American And Clean-Energy Crypto Mining
* Increased Stablecoin Integration
* Nation-State Adoption Of Digital Assets
* New Regulatory Developments
Regarding nation-state adoption, Sonnenshein speculated that this will likely include the piloting of central bank digital currencies, CBDCs, as well as the possibility of Bitcoin being added as a strategic reserve for some governments.
On the topic of miners, he said that Foundry, a Grayscale sister company, has already become the largest cryptocurrency miner in North America.
Digital Currency Group, the company behind Grayscale and Foundry, revealed last year that it will invest $100 million into mining Bitcoin and other digital assets in North America.
Grayscale’s investment products have become a sort of bellwether for digital-asset adoption. The firm’s assets under management, or AUM, exploded from just $2 billion at the start of 2020 to more than $20 billion at the end of the year. That growth has yet to taper off, with total AUM reaching $28.1 billion on Jan. 19.
Holding roughly 3% of Bitcoin’s circulating supply, Grayscale appears to be having a gravitational pull on BTC’s price. JPMorgan Chase strategists led by Nikolas Panigirtzoglou believe the investment manager is key to Bitcoin returning above $40,000 in the near term. In order to get there, Grayscale would need to maintain a consistent pace of buying to the tune of $100 million per day.
Biggest Crypto Fund’s 40% Premium Evaporates During Meltdown
The biggest Bitcoin fund’s hefty markup is collapsing amid concern investors are racing for the exit amid the cryptocurrency’s plunge this week.
The $22 billion Grayscale Bitcoin Trust (ticker GBTC) dropped over 15% this week, outpacing Bitcoin’s weekly losses of 11%. As a result, GBTC’s premium to its underlying holdings — which swelled to 40% in December as the cryptocurrency surged — has dropped to just 2.8%, the lowest since March 2017, according to data compiled by Bloomberg.
The magnitude of GBTC’s drop and its eroding premium suggest that investors are dumping their positions, according to WallachBeth Capital’s Mohit Bajaj.
“When there is a big move to the downside, bids tend to drop and that premium ends up collapsing because investors are trying to get out of positions,” said Bajaj, WallachBeth’s director of ETFs. “Because of this, the arb band tightens because arbitragers are selling their hedge faster than they can unload the GBTC they are buying back in the marketplace.”
Seres Lu, an outside spokesperson for Grayscale Investments, didn’t immediately respond to a request for comment.
Bitcoin climbed to an all-time high of nearly $42,000 earlier this month, building on 2020’s massive gains. However, the digital asset has tumbled this week, stoking worries the pace of its red-hot rally can’t be sustained.
To Nate Geraci, president of investment advisory firm the ETF Store, the premium plunge can be attributed to a combination of Bitcoin’s sharp drawdown happening at the same time that a slew of GBTC shares exited their six-month lockup period.
In addition, said Geraci, the trust is seeing increased competition, including from a new Bitwise product as well as one by Osprey, which charges a lower fee.
“Additional competition will likely crimp demand for GBTC, putting downward pressure on any existing premium,” he said, adding that a Bitcoin exchange-traded fund could help solve the issue.
GBTC tends to trade at a premium, given that the trust doesn’t allow for share redemptions and demand has boomed. While such divergences occasionally crop up in ETFs, specialized traders known as authorized participants step in to arbitrage the gap away by creating or redeeming shares of the ETF. No such mechanism exists for GBTC.
The Securities and Exchange Commission has thus far declined to approve a Bitcoin ETF, despite applications repeatedly filed since 2013. But some industry watchers, citing new SEC leadership within the Biden administration, say they’re hopeful one might be approved by the regulator as early as this year.
According to James Pillow, a portfolio manager at Moors & Cabot, GBTC’s extreme premiums may disappear as more crypto-focused investment vehicles enter the market.
“It has had no real competition,” he said. “That supply increase should alleviate the need for extreme premiums, and if a comparable ETF (versus a trust) is actually created, it should eliminate all meaningful premiums or discounts.”
Rothschild Investment Corporation Increases Stake In GBTC As Institutional Adoption Grows
The institutional investment manager holds 30,454 shares of Grayscale’s GBTC, according to a new SEC filing. And no, the firm is not part of the Rothschild family dynasty.
Rothschild Investment Corporation, a leading Chicago-based financial institution founded in 1908, has invested heavily in Grayscale’s Bitcoin Trust, according to a Monday morning filing with the United States Securities and Exchange Commission, or SEC.
Rothschild reported owning 30,454 shares of GBTC as of Dec. 31, 2020, according to Form 13F-HR, also known as the institutional manager holdings report. In its October filing, the firm reportedly owned 24,500 shares.
According to its corporate website, Rothschild Investment Corp was founded in 1908 as Rothschild & Company. Its founders, Monroe Rothschild and brother-in-law Samuel Karger, started the firm as a full-service brokerage. However, it’s not part of the Rothschild family dynasty, according to Bloomberg.
GBTC represents publicly quoted shares of Grayscale’s increasingly popular Bitcoin Trust, which now has over $20 billion in assets under management. GBTC generated $217.1 million in average weekly inflows during the fourth quarter, a new record high.
GBTC currently trades at less than $34.00 per share.
Rothschild increased its exposure to Bitcoin (BTC) during a pivotal time in the cryptocurrency’s bull market. Bitcoin’s price nearly tripled in the fourth quarter before peaking near $42,000 in early January. Although price action has cooled off somewhat, BTC price is currently hovering around $34,000.
The investment manager is one of several big-name institutional players to enter the cryptocurrency market in the past year. This trend is expected to continue as central banks and governments expand their monetary base to support the post-pandemic recovery. In this vein, Bitcoin is increasingly viewed as a monetary hedge against inflation.
Digital assets will be top of mind at this week’s Davos Agenda. The summit, which is hosted by the World Economic Forum, features two sessions focused on “resetting digital currencies.” Although the discussions are likely to center around central bank digital currencies, or CBDCs, they magnify Bitcoin’s disruptive impact on traditional finance.
Grayscale Donates $1M To Coin Center, Pledges Up To $1M More In Matched Contributions
Grayscale hopes to build off the success of Kraken’s donate-and-match program from 2018.
Grayscale Investments, the world’s largest digital-asset manager, has pledged $1 million to Coin Center, Washington, D.C.’s most influential cryptocurrency advocacy group — a move it believes will help broaden “foundational knowledge” of the industry.
The million-dollar donation was announced Monday in a press release, which also revealed Grayscale’s plan to match contributions to Coin Center through the end of February. Over that period, Grayscale plans to match donations dollar-for-dollar up to an additional $1 million.
Grayscale got the inspiration for the donate-and-match program from Kraken, the San Francisco-based exchange that managed to raise over $3 million for Coin Center in 2018. That included $2 million in direct support from Kraken.
“Coin Center has played a key role in advocating for issues that affect our ecosystem,” Grayscale told Cointelegraph.
The asset manager added that in the past two months, “Coin Center filed two strong comment letters that played a key part in correcting issues in proposed rulemaking by the Financial Crimes Enforcement Network, or FinCEN, that would have had serious negative consequences for self-hosted wallet users and the overall digital currency industry.”
Coin Center is a leading think tank focused on advancing public policy issues in the realm of digital assets and blockchain. In 2017, the advocacy group took to Congress to demonstrate to lawmakers how Bitcoin works. Last year, the organization reached out to the cryptocurrency community to help ensure that COVID-19-era lockdown measures don’t encroach on civil liberties and privacy.
When asked about the most pressing advocacy work needed for the crypto industry today, Grayscale said:
“It all comes down to education. Regulators need to have foundational knowledge of a topic to be able to make informed decisions about the bills that cross their desk. Education is both the biggest challenge and opportunity for our industry when it comes to policymakers.”
Neeraj Agrawal, Coin Center’s director of communications, told Cointelegraph he was “blown away by the community and industry’s continued support” of the advocacy group. “We are going to use these funds to continue representing Bitcoin, Ethereum, and cryptocurrency in general in D.C.,” he said.
In the coming year, Coin Center plans to remain focused on advancing financial privacy and “more sensible tax policy,” Agrawal said.
Following In Grayscale’s Footsteps, New Bitcoin Trust Goes Public In Canada
The investment firm said it had no plans to sell shares of its Bitcoin trust in the United States.
Canada-based investment manager Ninepoint Partners has launched trading for shares of the firm’s Bitcoin trust on the Toronto Stock Exchange.
According to an announcement today, Ninepoint has completed an initial public offering for its Bitcoin trust for $230 million Canadian dollars, or roughly $180 million U.S. dollars.
The investment firm said that it would be issuing three different classes of 17,990,491 units at a price of $10, more than 7 million of which are available for trading on the Toronto Stock Exchange under the ticker symbols BITC.U and BITC.UN for U.S. and Canadian dollars, respectively.
Ninepoint co-CEO and managing partner John Wilson referred to the move as the “largest initial public offering of a Bitcoin investment fund in Canada to date.“ The firm said the trust would have an annual management fee of 0.70% of its net asset value, calculated daily and paid monthly.
“We believe our institutional quality trust structure and lowest management fee of any listed Bitcoin investment fund in Canada will be a winning combination for continued investor interest,” Wilson said. “With this initial offering, we are laying the foundation for the success and growth of our Digital Asset Group.”
Like Grayscale’s crypto funds in the United States, Ninepoint said its objective was to expose new investors to digital currencies like Bitcoin (BTC). A fraction of the size of Grayscale with a reported C$7 billion ($5.5 billion) in assets under management, the investment firm said it would not be exploring selling shares of the trust in the United States.
US Wealth Manager Adds 10,667 Shares Of GBTC As Bitcoin Adoption Grows
Demand for Grayscale’s Bitcoin Trust is growing. Kingfisher Capital went from owning zero shares to over 10,000 in just a few months.
Kingfisher Capital, a North Carolina wealth manager, has scooped up 10,667 shares of the Grayscale Bitcoin Trust, according to a recent filing with the United States Securities and Exchange Commission, or SEC.
The filing, which appeared on the SEC website on Thursday, highlights Kingfisher Capital’s growing diversification. The wealth manager has exposure to hundreds of companies and funds across various sectors, from banking to energy.
Kingfisher reportedly had no exposure to Grayscale’s product as of November 2020, which means its purchase was recent, perhaps while Bitcoin (BTC) was at or near all-time highs.
On its website, Kingfisher says its mission is to “maximize value” for its investors, which primarily compromise affluent families, business owners, institutions and professionals.
The Grayscale Bitcoin Trust, which trades under the ticker symbol GBTC, has become a preferred method for gaining direct exposure to the digital asset. As Cointelegraph reported, a New York investment manager by the name of Rothschild Investment Corporation recently upped its exposure to GBTC to 30,454 shares as of Dec. 31, 2020.
Total assets held under Grayscale’s Bitcoin Trust are worth over $20 billion, the fund manager disclosed Wednesday.
Grayscale May Jumpstart The Next Phase Of The Bitcoin Bull Run Tomorrow
A release of funds from lock-up traditionally heralds the start of price upside and ends consolidatory phases, data shows.
Bitcoin (BTC) may have traded sideways for much of last month thanks to Grayscale, but the status quo will soon change.
According to data from on-chain analytics resource CryptoQuant, the price premium of the Grayscale Bitcoin Trust (GBTC) just hit its lowest since April 2019.
Grayscale Lock-Up Ends Wednesday
Grayscale has made the headlines frequently this year thanks to record BTC purchases and record demand, but despite the inflows, BTC/USD has not continued to gain.
As February begins, the Trust’s purchase premium is at around $6.50, having previously been as high as $40 over the course of its existence. This historically coincides with meandering price direction, while large premiums equal large upside moves for Bitcoin.
In late December, a dedicated article in technology magazine Hackernoon explained the phenomenon as being tied to releases of GBTC shares which have been subject to a customary lock-up.
Once they are released, Bitcoin tends to shoot higher as customers put their profits back into BTC, while the time preceding such events corresponds to a lack of price action.
“What’s important to know is once these higher prices and premiums are realized after an unlocking, price goes on to consolidate. This lets the premium shrink again before its next unlocking event,” Hackernoon summarized.
With the next unlocking set for Feb. 3, anticipation should be building for a continuation of the Bitcoin bull run.
“This voids enables premiums to shrink again just like the nine times before,” the article continued, correctly predicting the price behavior for the second half of January.
“And it’ll keep shrinking until the next unlocking. Because of this I expect price to either consolidate or sag.”
No Sag For Grayscale Investment
Grayscale meanwhile continues to expand its offerings as institutional interest broadly shows no signs of slowing for either Bitcoin or altcoins.
This week saw its Ethereum Trust reopen after being closed since December, while Feb. 25 will see Grayscale sponsor crypto-focused event the Bloomberg Crypto Summit.
GBTC had $21.8 billion in assets under management as of Feb. 1. Ether (ETH) purchases have been on pause since Dec. 10.
Grayscale’s products have become a magnet for institutional investors. Total investments into Grayscale products reached $3.3 billion in the fourth quarter of 2020, which translated into average weekly inflows of $250.7 million. The Bitcoin investment trust was by far the most popular fund, generating $217.1 million in average weekly inflows.
Bitwise, Grayscale Rival Files for Approval To Publicly Trade Its Bitcoin Fund
The fund aims to compete with Grayscale’s Bitcoin Trust and others by offering a 50 basis point lower expense ratio.
Bitwise Asset Management, a provider of cryptocurrency index funds, is seeking regulatory approval that would enable it to publicly trade shares of its bitcoin fund on an over-the-counter (OTC) marketplace.
According to a press release issued Tuesday, the company has filed a 211 form with the U.S.’s Financial Industry Regulatory Authority (FINRA) for the Bitwise Bitcoin Fund.
Aiming to compete with bitcoin (BTC, +6.02%) investment vehicles from the likes of Grayscale Investments and Galaxy Digital, the firm plans shares of its fund to be publicly traded on the New York-based OTCQX marketplace. Fidelity Investments would oversee the custodianship of the fund’s bitcoin assets.
OTCQX is designed for both U.S. and international companies, which are required to meet strict financial standards to qualify for the market.
If approved by FINRA, shares in the Bitwise fund would be available for trading in traditional brokerage accounts and could be held with traditional custodians, according to the release. The company is yet to announce a ticker for the fund.
“There is significant growth in interest from professional investors in accessing bitcoin as a tool to hedge their portfolios against rising inflationary risk,” said Bitwise’s chief investment officer, Matt Hougan.
Hougan added that increasing numbers of financial advisors are “taking note” of large allocations to bitcoin from hedge funds, institutions and insurance companies, and may move to make their own investments.
The company told CoinDesk the fund offers a 1.5% expense ratio, which is lower than Grayscale’s Bitcoin Trust (GBTC) at 2.0%. Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.
Should approval be granted, the Bitwise Bitcoin Fund will become the second Bitwise fund cleared for public quotation following the company’s successful approval for its Bitwise 10 Crypto Index Fund in December.
Grayscale CEO: Firms Race To Buy Bitcoin As Mood Shifts From ‘Why’ To ‘Why Not?’
Grayscale CEO Michael Sonnenshein told CNBC that more tech leaders and institutional investors could follow Elon Musk into Bitcoin after Tesla’s $1.5 billion purchase.
Grayscale CEO Michael Sonnnenshein says institutional demand for Bitcoin (BTC) has only increased, moving into 2021, following a record-breaking year that saw Grayscale’s assets under management soar to new heights.
Sonnenshein told CNBC’s Squawk Box on Feb. 10 that the record inflows witnessed last year have continued, and interpreted this as a sign that Bitcoin’s current upsurge could continue.
Contrary to narratives emanating from government entities, Sonnenshein says regulation is not a concern for would-be investors, many of whom, he claimed, are satisfied that enough regulatory clarity has been provided.
Sonnenshein said, “Conversation point number one starts around regulatory concerns, and actually, a lot of those conversations are characterized by a lack of regulatory concerns. A lot of the folks making decisions around this realize how much regulatory clarity has been provided around this.”
In the same week that Tesla invested $1.5 billion into Bitcoin, Sonnenshein says most institutional investors are happy to edge into Bitcoin over time, rather than throwing all their eggs into one basket.
“I think the second piece of the conversation is around sizing and timing. So you’re seeing corporations think about anywhere from, on the low end, 25 basis points, to, on the higher end, maybe 100 or 200 basis points over time. And they recognize that they don’t need to get invested all at once.”
For context, Tesla recently invested roughly 770 basis points, or 7.7% of its gross cash holdings, into Bitcoin. Sonnenshein said the investment strategy taken by MicroStrategy might be more typical of future buyers. MicroStrategy bought $1 billion worth of Bitcoin across the span of 2020.
“They’ve seen other corporations like MicroStrategy legging into this trade over time, and they ultimately believe in the growth of this. So buying Bitcoin whether it’s here, ten percent higher, or ten percent laower, ultimately, is not going to matter if they think Bitcoin is going to have the type of growth they think it is going to have over time,” he stated.
According to Sonnenshein, the question surrounding Bitcoin is changing from “why?” to “why not?,” as the leaders of major tech companies like Tesla and Twitter flood into the cryptocurrency market. Sonnenshein thinks more “visionaries” will follow the likes of Elon Musk in buying Bitcoin. He said:
“I wouldn’t be surprised to see there being almost some sort of a race now — you have Elon Musk, you have Michael Saylor, Jack Dorsey. You’re gonna see a lot of other visionary leaders in disruptive companies actually realizing that it’s really moved from ‘why’ to ‘why not’, and see which companies are next to get involved in having Bitcoin as part of their treasury program.”
The signals all look good for 2021, according to Sonnenshein, who says institutional inflows have already gained momentum since the start of the new year.
“If flows are any indication of investor interest on the heels of a record-breaking 2020, I’m very pleased to say, and encouraged that that momentum is not only continuing this year, but is actually accelerating. So we’re seeing very very sustained and growing demand from a lot of institutional players at the moment,” he concluded.
Biggest Bitcoin Fund Grayscale Bitcoin Trust (Ticker GBTC) Sinks To A Discount As Traders Flee
The world’s biggest Bitcoin fund is selling off faster than the cryptocurrency itself.
The $32 billion Grayscale Bitcoin Trust (ticker GBTC) has plunged 20% this week, outpacing a 13% decline in the world’s largest cryptocurrency. GBTC’s once-massive premium to its underlying holdings has evaporated as a result, with the price of GBTC closing 0.7% below its underlying holdings on Wednesday — the first discount since March 2017, according to data compiled by Bloomberg.
The vanishing premium suggests that after billions poured into GBTC as investors sought exposure to Bitcoin’s dizzying rally, investors are looking for the exits as the climb stalls, according to Bloomberg Intelligence.
“This is panic or profit-taking selling,” said Eric Balchunas, BI’s senior ETF analyst. “It’s almost like the price of GBTC is an amplified version of Bitcoin price.”
Bitcoin surged to a record of over $58,000 last weekend, but has stumbled since. The cryptocurrency fell another 1.4% on Thursday, on pace for its worst weekly pullback in a year.
Michael Sonnenshein, chief executive officer of Grayscale Investments, acknowledged the risk of GBTC’s premium disappearing while speaking in a panel for the Bloomberg Crypto Summit on Thursday.
“It’s certainly a risk, no question about it, but ultimately price discovery in GBTC every day is driven entirely by market forces,” Sonnenshein said.
Grayscale’s Bitcoin Premium Has Dropped To Record Lows Below Zero
Grayscale Investments’ GBTC might be the absolute market leader but it is currently trading below fair value as the TSX Purpose Bitcoin ETF is seeing record inflows.
Grayscale Bitcoin Trust ($GBTC) is currently the largest listed cryptocurrency asset with $30.17 billion in assets under management. The firm currently holds more than 655,730 BTC and the security is tradable in the United States through over-the-counter markets.
How Is GBTC Different From A Bitcoin ETF?
The fund was launched in 2013 and the Grayscale Bitcoin Trust became the preferred institutional vehicle in the U.S. for BTC due to the lack of a Bitcoin exchange-traded fund (ETF).
Investment trust funds are regulated by the U.S. Office of the Comptroller of the Currency (OCC) and they are designed exclusively for accredited investors. Nevertheless, those can be sold to retail traders after a six-month lock-up period.
This specificity causes GBTC shares to trade above the equivalent BTC held by the trust whenever there’s retail demand on secondary markets. Meanwhile, institutional clients can buy at par directly from Grayscale Investments regardless of the price on OTC markets.
As displayed above, such a premium sometimes surpassed 40%, indicating heavy buying pressure from retail investors. The situation changed over the past four weeks as Bitcoin price peaked at $58,000 and initiated a substantial correction, causing the GBTC premium to range between 5% and 10%.
A diminished appetite in the secondary markets creates a potential imbalance as there is currently no redemption program for the GBTC. Had there been a way to convert it back to BTC, a market maker would gladly buy the trust shares at a discount.
Although the recent price crash could explain the 7% discount seen on Feb. 26, Bitcoin faced multiple 30% corrections in the past with no apparent impact on GBTC premium. Even during the horrific bear market in late 2018, GBTC traded above the net asset value (NAV).
A New Challenger Appears
Although no better alternative was previously offered, Canada’s TSX launched a Bitcoin ETF on Feb. 18, providing investors direct exposure to BTC. This structure allows the market maker to create and redeem shares, thus minimizing eventual premium or discount to the net asset value.
This time around, the selling pressure that took place found less buying activity from non-accredited investors. On the other hand, the Canadian Purpose Investments ETF surpassed 10,000 BTC under management in one week, which signals the instrument’s success despite a sharp downturn in BTC price.
Unless Grayscale Investments opens a redemption program, nothing is preventing GBTC from continuing to trade below its net asset value.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Grayscale Parent Digital Currency Group Plans To Buy $250M Of Its Own GBTC Shares
In a further sign of a shake-up in the institutional market, DCG is eyeing the purchase along with hiring ETF specialists.
Cryptocurrency asset manager Grayscale has a new buyer of shares in its Grayscale Bitcoin Trust (GBTC) — its owner.
In a press release on March 10, Grayscale parent company Digital Currency Group (DCG) announced plans to purchase up to $250 million of GBTC shares.
GBTC To Buy “Up To $250 Million” In Shares
The move, which comes amid volatile conditions for GBTC, follows plans to hire specialists in the exchange-traded fund (ETF) sphere, signaling a potential diversification by the company.
According to the press release, DCG “has authorized the purchase by DCG of up to $250 million worth of shares of Grayscale Bitcoin Trust.”
“DCG plans to use cash on hand to fund the purchases and will make the purchases on the open market,” it added.
DCG did not specifically state the reasoning behind the buyback.
Canada ETFs Put The Cat Among The Pigeons
As Cointelegraph reported, GBTC traded at its steepest-ever discount last week, with investors able to get exposure to Bitcoin (BTC) at 13% below market value.
The regulatory go-ahead for ETFs to launch in Canada is thought to have contributed to Grayscale’s headache, with investors looking for the best value proposition when it comes to embracing the traditionally volatile asset class.
The United States has yet to license a single ETF, with anticipation nonetheless building that regulators will sign off on a change to the status quo.
“A United States Bitcoin ETF will unleash a wave a of retail buying that will bend minds,” Nik Bhatia, author of Layered Money: From Gold and Dollars to Bitcoin, commented over the weekend.
“The trade flow will obliterate available stock (supply). The harsh truth about 21 million is that there just ain’t a lotta BTC for sale.”
Grayscale, Firm Behind Leading Bitcoin Trust, Is Hiring ETF Specialists
Nine new job postings indicate Grayscale is considering joining the race to win the SEC’s first bitcoin ETF approval.
Digital asset management firm Grayscale might be on the cusp of trying to launch a bitcoin exchange-traded fund (ETF), according to new job postings.
The nine postings strongly suggest the New York-based firm is planning an ETF business. The listings are undated but the firm tweeted a link to its jobs board Tuesday evening. Grayscale is a subsidiary of Digital Currency Group, CoinDesk’s parent company.
A bitcoin ETF is a retail-accessible trading vehicle that can give both individuals and institutions exposure to the bitcoin market without having to hold bitcoin itself. The industry has long clamored for an ETF, with various firms filing applications to the U.S. Securities and Exchange Commission (SEC) as far back as 2013. Grayscale has previously not applied for an ETF.
The job postings all refer to Grayscale’s “ETF business,” though the firm does not currently offer any exchange-traded products. It does offer a number of cryptocurrency trusts, bitcoin being chief among them, that trade at a premium to the spot price.
Notably, it would appear that these potential ETFs would not be limited to bitcoin vehicles.
New Business Line?
One of the postings is for an ETF Creation & Redemption Specialist, who would be responsible for managing pricing sources and understanding “how to create a ‘basket’ of digital assets for inclusion in an ETF.”
Another posting calls for an ETF Market Maker Relationship Manager, who would be tasked with developing new relationships with market makers while maintaining existing ones for the ETF business.
Candidates for this position would need to have, “Experience in interacting with FINRA, SEC, NYSE, NYSE ARCA, CBOE, and/or other securities exchanges, either directly or in collaboration with Compliance and Legal staff,” the job posting said.
Grayscale’s existing trusts do not trade on the NYSE/CBOE platforms but are traded by retail investors in over-the-counter (OTC) markets.
The job openings come weeks after the Grayscale Bitcoin Trust and Ethereum Trust both began trading at discounts to the spot price of bitcoin, reversing years of trading at a premium.
Canada is poised to deliver its third bitcoin ETF this week, but the U.S. Securities and Exchange Commission (SEC) has yet to approve one.
Industry experts believe that a bitcoin ETF, which the SEC has repeatedly rejected, might finally see the light of day in the U.S. this year, noting both the Canadian approvals as well as new leadership at the securities regulator.
A Grayscale spokesperson did not immediately return a request for comment.
Grayscale Halts New Investments in GBTC After Trading at 15% Below Bitcoin
Earlier today, the investment manager’s parent company, Digital Currency Group, said it authorized the purchase of GBTC shares.
Digital assets management firm Grayscale has halted inflows to the Grayscale Bitcoin Trust (GBTC) after the fund traded at a 15% discount to the price of the bitcoin (BTC, +2.51%) the trust holds.
Rocked by the number of alternative bitcoin trusts and Canadian bitcoin exchange-traded funds, Grayscale Bitcoin Trust has been trading below the price of bitcoin for several weeks. Its sibling, Grayscale Ethereum Trust, has also flipped into negative territory. Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.
DCG announced earlier today that it would buy up to $250 million in GBTC shares. Repurchasing shares is a common tool among companies seeking to increase the price of those shares by simultaneously creating demand while decreasing the number of shares outstanding. Yesterday, CoinDesk revealed that Grayscale was hiring nine specialists in the ETF space, possibly signaling a pivot in its fund’s business model.
Israeli Asset Manager Doubles Its $100M Bitcoin Investment In Just Two Months
The firm invested $100M into the Grayscale Bitcoin Trust late last year, it has sold one third and it’s holdings are still worth $50M more than the purchase price.
Israel’s Altshuler Shaham Investment House has doubled its money after tipping $100 million into the Grayscale Bitcoin Trust late last year. It’s the only Israeli institution kn to have invested this magnitude of funds into Bitcoin so far.
The news follows increasing institutional interest in Bitcoin internationally, with reports on March 7 that Chinese tech company Meitu had become the first Hong Kong-listed company to invest $40 million into cryptocurrencies, split between Ethereum and Bitcoin.
Israel’s Globes publication reported that Altshuler Shaham acquired the GBTC shares in late 2020 when Bitcoin was trading around $21,000. Co-CEO, founder and co-owner Gilad Altshuler told the publication:
“The $100 million investment has become $200 million, and of the $200 million we have already sold about a third.”
He added, “This is a new investment for us. It took a few months until we got all the relevant approvals and all the opinions that approved our investment in the field.”
The Globes report stated the investment house currently holds around $150 million worth of the cryptocurrency — with Altshuler noting it may add more :
“It depends on the price. We were a little intimidated by the speed with which Bitcoin reached these prices, with its global market capitalization crossing the $1 trillion mark, and that worried us a bit.”
Altshuler Shaham is one of the largest investment houses in Israel, managing around $51.5 billion in long term savings for retirement and pension funds as of the end of January. It’s not the first time Altshuler Shaham has dabbled in cryptocurrency, with the firm reportedly taking positions in local initial coin offerings back in 2017.
It’s subsidiary Altshuler Shaham Horizon is more actively involved in crypto investments and last week appointed Ilan Stark, who previously managed the trading and capital markets division of Israeli blockchain company Orbs, as its new CEO.
The $100 million was invested in BTC via the Grayscale Bitcoin Trust — which currently has around $31.4 billion in assets under management. Recently shares have been trading at a 15% discount to the underlying value of the Bitcoin held.
As of March 7, private placement offerings for GBTC shares were halted, however this is an occurrence that happens periodically.
‘Slam Dunk’ Bitcoin Arbitrage Fizzles For Biggest Crypto Fund
One of the most popular arbitrage trades in cryptocurrencies is unraveling as the biggest Bitcoin fund’s once-hefty premium collapses.
The trade relies on the Grayscale Bitcoin Trust (ticker GBTC) trading at a premium to the value of the Bitcoin it holds — a phenomenon caused in large part by investors paying up for access to the coin without having to buy it directly. When that happens, hedge funds swoop in to take advantage.
They borrow Bitcoin, deposit the coins with GBTC in exchange for shares that are more valuable than the coins they bought, and they pocket that profit by selling the marked-up shares after a six-month lockup period expires. Thanks in part to the trade’s popularity, GBTC’s assets have swelled to over $35 billion from about $1.5 billion a year ago.
The fund has for much of its history traded at a premium to its underlying holdings, making the trade very profitable. However, as Bitcoin’s rally turns choppy and a stable of competing products attract attention, GBTC sank to a record discount relative to the value of the Bitcoin it holds.
Exacerbating that situation is the fact that GBTC doesn’t allow redemptions — meaning that shares can only be created, but not destroyed because the assets are held in a trust. That means that as new accredited investors plowed into the fund and boosted outstanding GBTC to a record high, those shares are now exiting the lock-up period at a time when demand for Bitcoin is fluctuating.
“It became just too popular and there’s only so much demand at the end of the day by retail investors who are using Schwab or using Fidelity or a traditional brokerage,” said Nic Carter, a partner at crypto-focused venture firm Castle Island Ventures.
“Basically, too many funds plowed capital into this trade thinking it was a slam dunk, and then as that capital matured and the units in the trust became market-tradable, the demand that they expected to materialize wasn’t there from the market.”
GBTC’s price sank as much as 11.6% below its net-asset value last week, its largest-ever discount, according to data compiled by Bloomberg. That figure shrank to 3.22% on Tuesday as Bitcoin prices rebounded. While the world’s largest cryptocurrency has gained roughly 25% over the past month, GBTC is 14% higher in that period.
GBTC traded at a premium as high as 40% in late December as investors rushed to get exposure to anything in a crypto wrapper — more than double its one-year average premium of 16.3%.
Grayscale’s ETF Push Highlights Existential Threat to GBTC Dominance
Grayscale’s competitive moat is shrinking as rival offerings attract investor money, amid speculation the SEC might be moving to approve a bitcoin ETF.
For seven years, Grayscale Investments’ bitcoin (BTC, +7.77%) trust has been nearly the only game in town for investors who wanted to bet on bitcoin’s price without the fuss of handling cryptocurrency.
Lately that’s been changing fast. From alternatives like Osprey’s bitcoin fund to Bitwise’s cryptocurrency index to Canadian bitcoin exchange-traded funds (ETFs), investors now have more choices for hassle-free bitcoin exposure. Arguably, MicroStrategy and even Tesla, shares might scratch the itch now.
The once-sizable premium over the price of bitcoin for shares in the Grayscale Bitcoin Trust (GBTC) has flipped to a discount, reflecting a drop in demand for the vehicle.
“I don’t think we’re going to see 40% to 50% premiums again like in 2017,” said crypto analyst Kevin Rooke. “There is institutional awareness now and so many ways to get the same exposure.”
And if the U.S. Securities and Exchange Commission approves a bitcoin exchange-traded fund (ETF) this year, the Grayscale Bitcoin Trust (GBTC) might end up marginalized as the obsolete legacy of a regulatory regime that has since passed.
“If we have a bitcoin ETF in the U.S., there probably will be no more inflows into any bitcoin trust,” said Steven McClurg, chief investment officer of Valkyrie Investments, which has its own pending proposal for a bitcoin ETF.
Grayscale clearly sees the writing on the wall. Far from sitting on its hands, the investment manager (which, like CoinDesk, is owned by Digital Currency Group) has been buying back GBTC shares, helping to stabilize the price. Perhaps more significantly, the firm is hiring specialists to compete in the bitcoin ETF space.
“Grayscale is continuously exploring new opportunities, such as an ETF, in response to customer demand,” said Grayscale CEO Michael Sonnenshein. “We were the first to provide exposure to a digital asset through a regulated wrapper, and our goal is to ensure that we lead the market in whatever future product we bring forward as well.”
Such adaptive measures show how rapidly the bitcoin market structure is changing as the price trades near all-time highs and the mainstream investors Grayscale has been courting for years are arriving in greater numbers than before.
Firms are now adding millions of dollars worth of bitcoin to their corporate treasuries, institutions are buying more bitcoin than what’s being mined, and Goldman Sachs plans to relaunch its crypto trading desk after a three-year hiatus.
Hypothetically, the investment manager could convert GBTC into an ETF, but it would be expensive compared with others already on the market under the current fee structure. CI Global Asset Management has advertised that its Canadian bitcoin ETF would have a 0.4% annual fee.
Grayscale could instead create a bitcoin ETF that’s secondary to GBTC but with a lower fee than GBTC’s current 2% annual fee, said James Seyffart, ETF research analyst at Bloomberg Intelligence. (With around $36 billion in assets under management, Grayscale rakes in around $700 million annually, Seyffart said.)
That would give Grayscale some wiggle room to convert GBTC into an ETF, giving it the opportunity to create one of the most liquid bitcoin funds in the world, Seyffart added, but the investment manager would have to act fast. Seyffart said he’s become less confident now that Grayscale can hold onto institutional investors after seeing trading volumes soar on Canada’s bitcoin ETFs.
There’s also the possibility that as more institutional investors become comfortable with cryptocurrencies, they will be willing to hold bitcoin directly, instead of doing so through a fee-heavy investment vehicle, Seffyart added.
“People are less interested in holding money in GBTC and want to hold bitcoin themselves,” he said.
Grayscale Offers New Trusts To Invest In 5 More Cryptos Including Filecoin, Chainlink
The firm had filed for the trusts in Delaware in late January.
Grayscale Investments, the world’s largest digital asset manager, is digging into the world of decentralized finance (DeFi) with five new new trust offerings Wednesday, including Chainlink’s link token, Brave Browser’s brave token and MANA, the money for virtual world Decentraland.
* The two remaining trusts will offer exposure to decentralized data storage provider Filecoin’s file (FILE) and decentralized video streaming network Livepeer (LPT). All five cryptocurrencies are up on the news. LPT is up over 100% in 24 hours, according to CoinGecko.
* The newest Grayscale trusts follows a slate of similar products from other digital asset managers looking to draw in institutional money to the red hot DeFi market. For example, CoinShares released its DeFi Index Token last month, as did Bitwise with its Bitwise DeFi Crypto Index Fund.
* The firm had filed for the trusts in Delaware in late January, as CoinDesk reported at the time.
* We may soon see trusts for Aave, Cosmos, Polkadot, monero and Cardano if other filings are followed through.
* “At any one time, we’re probably maintaining a list of what could be 30 products, could be 40 products that we’re interested in bringing to market,” Grayscale CEO Michael Sonnenshein told Bloomberg.
* The new trusts are the firm’s first additions since 2019, and come after Grayscale assessed both potential demand and did due diligence on the underlying protocols, per the report.
* While the five cryptocurrencies now supported for investment are not mainstream yet, Sonnenshein said many of Grayscale’s trusts “have historically been a little bit before their time.”
* New York-based Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.
Grayscale’s Sonnenshein Addresses GBTC’s Collapsing Premium
Sonnenshein thinks U.S. regulators aren’t ready to approve a bitcoin ETF yet.
Grayscale CEO Michael Sonnenshein said the crypto asset management company is taking a wait-and-see approach to filing for a bitcoin exchange-traded fund (ETF).
* On CoinDesk TV Tuesday morning, the CEO, who took over Grayscale – owned by CoinDesk parent Digital Currency Group – in January, suggested U.S. regulators still aren’t ready to approve a bitcoin ETF, even though Grayscale is preparing for such an eventuality.
* A bitcoin ETF would likely oust Grayscale’s Bitcoin Trust (GBTC) product from its dominant position by offering investors far lower fees and nixing the fund’s premium/discount discrepancies, negatives that have spooked some advisories from touching GBTC.
* Rebuffing assertions that an armada of recent bitcoin fund products could challenge GBTC with more competitive fee structures, Sonnenshein said the trust’s 2% annual fee would remain.
* He notched Grayscale’s collapsing premium to the forces of supply and demand. “There have been so many shares created that that has put some selling pressure on the stock itself, but ultimately [I] do not foresee this as a product issue.,” he said.
* Institutional investors continue to line up, he said, predicting the market remains in the “early days” of a corporate bitcoin adoption trend that may accelerate through 2021.
Biggest Bitcoin Fund’s Woes Worsen As Discount Hits Record
Bitcoin’s worst selloff since December is dealing a particularly harsh blow to the biggest fund tracking the cryptocurrency.
The Grayscale Bitcoin Trust (ticker GBTC) has dropped about 20% so far this week, nearly double the decline in the world’s largest cryptocurrency. The $36.4 billion fund, closed over 14% below the value of its underlying holdings on Wednesday as a result — a record discount, according to data compiled by Bloomberg. The dislocation has deepened despite Grayscale Investment LLC parent Digital Currency Group Inc.’s plans to purchase up to $250 million worth of GBTC shares.
The GBTC free-fall highlights the extent to which the latest leg of the retail-driven crypto craze is cooling. The trust has persistently traded at a premium to its net asset value since launching, with investors willing to pay up for a piece of Bitcoin as it rockets higher.
However, given that GBTC doesn’t allow redemptions — meaning that trust shares can only be created, not destroyed like in conventional funds — the number of shares outstanding has ballooned to a record 692 million. With Bitcoin’s price now stalling, that’s created a supply and demand imbalance as accredited investors in the trust seek to offload their shares in the secondary market
“GBTC has a fixed supply and acts like a leveraged play on Bitcoin,” Bloomberg Intelligence analyst James Seyffart said. “As price goes down, sentiment goes down, GBTC is going to fall further than Bitcoin. Same thing happens on the way up.”
Bitcoin fell for a fifth day on Thursday to a two-week low, its longest losing streak since December. Demand for crypto has sank amid emerging signs that retail traders are retreating from markets, with everything from call options volume to GameStop Inc. shares to the mega-popular Ark Innovation exchange-traded (ticker ARKK) fund faltering.
In addition to individual investors stepping back, demand from institutions may be cooling with the debut of several Bitcoin ETFs in Canada. While U.S. regulators have yet to approve the structure, high-profile issuers such as Fidelity Investments have filed plans.
“The addition of ETFs in Canada likely pulled away some capital from GBTC,” Seyffart said. “Mainly institutional money, because most retail can’t easily buy a Canadian ETF.”
Grayscale Says It’s ‘100% Committed To Converting GBTC Into An ETF’
In a blog post, the world’s largest digital asset manager, confirmed its intent to offer an ETF.
Grayscale Investments said it’s “100% committed” to converting its flagship Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF).
In a blog post, the world’s largest digital asset manager confirmed its intent to re-apply with the U.S. Securities and Exchange Commission (SEC) to offer an ETF.
“First and foremost we wish to make clear: we are 100% committed to converting GBTC into an ETF,” Grayscale said in the post. (New York-based Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.)
The U.S. approval of a bitcoin ETF has remained one of the white whales of the crypto industry, with the SEC rejecting dozens of applications in recent years. Some industry observers see an ETF, which provides traditional investors with access to without having to hold the asset itself, as a potential game-changer.
“Grayscale first submitted an application for a Bitcoin ETF in 2016 and spent the better part of 2017 in conversations with the SEC,” the firm wrote in its blog post. “Ultimately, we withdrew our application because we believed the regulatory environment for digital assets had not advanced to the point where such a product could successfully be brought to market.”
GBTC’s Collapsing Premium
GBTC has been trading at a discount to the price of bitcoin for more than a month. Historically, GBTC had traded at a premium to the price of bitcoin. Shares of GBTC had traded at more than a 35% premium in mid-December, according to data from YCharts.
Analysts speculate that the current discount is being caused by market competition.
From alternatives like Osprey’s bitcoin fund to a flood of Canadian bitcoin ETFs, institutional investors now have more choices for seamless bitcoin exposure.
In early March, CoinDesk discovered that Grayscale was hiring several ETF specialists.
Grayscale Tops $50 Billion: ‘Will Soon Pass World’s Largest Commodity ETF’
Grayscale continues to grow, passing $50 billion. That’s equivalent to the world’s second-largest commodity ETF.
Major U.S. asset manager Grayscale has just surpassed $50 billion in cryptocurrency assets under management for the first time. Grayscale’s AUM is creeping ever closer to the $57 billion holdings of the largest commodity ETF.
The company has plans to convert into an ETF when regulations allow.
If the ETF had been approved already, Grayscale would be the second-largest commodity ETF behind SPDR Gold Shares. GLD is a physically-backed gold exchange-traded fund (ETF) with listings on stock exchanges in the U.S., Mexico, Singapore, Japan, and Hong Kong.
Grayscale CEO Michael Sonnenshein tweeted that he believes the Grayscale Bitcoin Fund, or GBTC, is likely to surpass the GLD fund by market cap in a few months.
Grayscale provides cryptocurrency exposure to institutional investors and holds approximately 660,000 BTC in total representing 3.5% of Bitcoin’s 18.68 million circulating supply. Almost 655,000 of these are held in Grayscale’s Bitcoin Trust.
Grayscale doesn’t just deal in Bitcoin, with almost 20% of the company’s AUM spread across a dozen other cryptocurrencies including Ethereum ($7.4b), Litecoin ($405m), Ethereum Classic ($267m), and Bitcoin Cash ($234m).
In the last month, five more trusts were created — Decentraland’s MANA ($18.6m), Livepeer ($13m), Filecoin ($7.7m), Basic Attention Token ($4.8m) and Chainlink ($4.5m).
The firm is already the largest U.S. digital asset manager by a large margin, with Pantera, the second-largest manager, holding only $4.3 billion, less than one-tenth of the $50 billion held by Grayscale.
Yesterday the asset manager announced a partnership with Time Magazine to produce an educational crypto videos series. The magazine also agreed to receive payment in Bitcoin and hold the digital asset on its balance sheet.
Grayscale Parent Firm DCG To Expand GBTC Buy Limit By $500M
Digital Currency Group has purchased a total of $194 million worth of GBTC shares so far.
Digital Currency Group, the parent company of digital asset manager Grayscale Investments, is now authorized to purchase up to $750 million worth of shares of Grayscale Bitcoin Trust.
The company announced Monday that DCG increased its prior authorization to buy up to $250 million worth of GBTC shares by an extra $500 million.
The share purchase authorization does not obligate DCG to acquire any certain amount of shares in any period, and it may be expanded, modified or discontinued at any time, DCG noted. Actual purchases will depend on many factors like the levels of available cash as well as price and market conditions, the firm said.
DCG mentioned that the firm had purchased a total of $193.5 million worth of GBTC shares as of Friday. DCG plans to use cash to fund the purchases and will make the purchases at management’s discretion in compliance with Rule 10b-18 under the Securities Exchange Act, the company noted.
The news comes shortly after DCG originally announced in March its plan to purchase up to $250 million of GBTC shares. The move came amid volatile conditions for GBTC and plans to hire talent in the exchange-traded fund industry, which signaled a potential diversification by the firm.
Launched back in 2013 as the Bitcoin Investment Trust, GBTC is the world’s largest Bitcoin (BTC) fund, offering investors the opportunity to gain exposure to Bitcoin through a publicly quoted private trust. As of Friday, the assets under management in GBTC amounted to more than $36 billion, with Grayscale’s total AUM standing at $46.7 billion. In mid-April — when Bitcoin touched it’s all-time highs above $64,000 — Grayscale’s total AUM topped $50 billion.
GBTC Discount Presents A Unique Challenge For Grayscale And Investors
The Grayscale Bitcoin Trust continues to trade at a discount compared to BTC, a situation that presents a unique challenge to Grayscale and investors.
Since 2013 the Grayscale Bitcoin Trust Fund (GBTC) has offered its investors exposure to Bitcoin (BTC) through a publicly quoted private instrument. However, the trust’s convertibility and liquidity vastly differ from an Exchange Traded Fund (ETF).
Trusts are structured as companies, at least in regulatory form, and are ‘closed-end funds’ which can initially only be sold to accredited investors. This means the number of available shares is limited, and retail traders can only access them via secondary markets. Furthermore, a GBTC share cannot be redeemed for the underlying BTC position.
Historically, GBTC used to trade above the equivalent BTC held by the fund, which was caused by the retail crowd’s excess demand. The common practice for institutional clients was to buy shares directly from Grayscale at par and sell at a profit after the six-month lock-up period.
During most of 2020, GBTC shares traded at a premium to its Net Asset Value (NAV), which varied from 5% to 40%. However, this situation drastically changed in March 2021. The approval of two Bitcoin ETFs in Canada heavily contributed to extinguishing the GBTC premium.
ETF funds are less risky and cheaper compared to trusts. Moreover, there is no lock-up period, and retail investors can attain direct access to buy shares at par. Therefore, the emergence of a better Bitcoin investment vehicle seized much of allure that GBTC once possessed.
Can DCG save GBTC?
In late February, the GBTC premium entered adverse terrain, and holders began desperately flipping their positions to avoid getting stuck in an expensive and non-redeemable instrument. The situation deteriorated up to an 18% discount despite BTC price reaching an all-time high in mid-March.
On March 10, Digital Currency Group (DCG), Grayscale Investments’ parent company, announced a plan to purchase up to $250 million of the outstanding GBTC shares. Although the conglomerate did not specify the reason behind the move, the excessive discount certainly would have pressured their reputation.
As the situation deteriorated, DCG announced a roadmap for turning its trust funds into a U.S. ETF, although no specific guarantees or deadlines have been informed.
On May 3, the firm announced that it had purchased $193.5 million worth of GBTC shares by April.
Moreover, DCG increased its GBTC shares repurchase potential to $750 million.
Considering the $36.3 billion in assets under management for the GBTC trust, there’s reason to believe that buying $500 million worth of shares might not be enough to ease the price discount.
Because of this, some important questions arise. For example, can DCG lose money by making such a trade? Who’s desperately selling, and is a conversion to an ETF being analyzed?
As the controller of the fund administrator, DCG can buy the trust fund’s shares at market prices and withdraw the equivalent Bitcoin for redemption. Therefore, buying GBTC at a discount and selling the BTC at market prices will consistently produce a profit and there’s no risk by doing this.
Apart from a few funds that regularly report their holdings, there’s no way to know who has been selling GBTC below net asset value. The only investors with 5% or more holdings are BlockFi and Three Arrows Capital, but none have reported reducing their position.
Therefore, it could be potentially multiple retail sellers exiting the product at any cost, but it is impossible to know right now.
While buying GBTC at a 10% or larger discount might seem a bargain at first, investors must remember that as of now, there’s no way of getting out of those shares apart from selling it at the market.
Record ‘Grayscale Discount’ Might Mean Bargain Bitcoin For Retail Traders
Anyone with a stock account can now make a savvy (albeit risky) bet on GBTC pricing disparities, previously exclusive to big players.
A closely tracked ratio in cryptocurrency markets known as the “Grayscale premium” flipped earlier this year to a discount, and it widened this week to a gaping 21%, the most on record, according to Skew.
But for retail traders, or anyone with access to a stock-brokerage account, the growing disparity might present an opportunity to buy bitcoin in the cheap, analysts say.
The Grayscale Bitcoin Trust (GBTC), from the crypto asset manager Grayscale, is the largest U.S. investment vehicle for buying bitcoin (BTC) via a stock exchange. The Grayscale discount represents the difference between the price of the underlying bitcoin assets and the value that’s implied from the price of the trust’s shares. (Grayscale is owned by Digital Currency Group, of which CoinDesk is an independent subsidiary.)
The bet some traders could be making now is that the discount would evaporate if Grayscale receives approval from the U.S. Securities and Exchange Commission (SEC) to convert the trust to an ETF. If that happened, according to one analyst, the shares might quickly climb back toward the price of the underlying bitcoin – allowing traders to recapture the discount as profit while still booking any gains from the cryptocurrency itself.
“Investors looking for long-term passive bitcoin exposure are probably better off buying GBTC over spot bitcoin since you get paid to wait more via the discount than you pay in excess fees,” wrote David Grider, strategist at investment research firm FundStrat, in an email.
In recent years, when GBTC was trading at a premium, the situation looked much different.
Grayscale ETH Trust Trades At 11% Premium
Roughly $60 billion worth of ETH changed hands over the past 24 hours while BTC saw $50 billion in trade.
Ethereum is seeing renewed interest in the aftermath of Bitcoin’s travails this week, with Ether’s 24-hour trade volume topping BTC’s by a significant margin.
However it’s still a long way from doubling Bitcoin’s volume as some ETH proponents suggested. On May 25, a screenshot of CoinGecko data circulated across Crypto Twitter showing the daily volume of Ether had surpassed $115 billion while Bitcoin’s sat at nearly $53 billion.
Speaking to Cointelegraph, CoinGecko’s co-founder and COO, Bobby Ong, revealed the data depicted in the screenshot was not accurate due to either an API error, or wash-trading, resulting in inflated ETH volumes reported by the EXX exchange.
Ong stated that Coingecko has since disabled its data feed from EXX. The platform now shows Ether has driven 20% more volume than BTC over the past 24 hours with roughly $60 billion trade compared to Bitcoin’s $50.2 billion.
While CoinGecko’s Bitcoin page has seen about 75% more traffic than its Ethereum page over the past seven days, the gap has narrowed significantly in the past 24 hours. Ong noted:
“In the past 24 hours, our Bitcoin page received about 60% more traffic compared to Ethereum. When it comes to search queries, Bitcoin received only about 7% more queries compared to Ethereum.”
The surging trade activity and interest has also coincided with institutional fund manager Grayscale’s Ethereum Trust (ETHE) seeing its premium over spot Ether prices bounce up to 11%. while the firm’s Bitcoin Trust has traded at a discount since March.
The data suggests that some institutions have turned their focus to Ethereum rather than Bitcoin.
Ethereum’s volume surged to overtake Bitcoin just days after segments of a leaked report from Goldman Sachs revealed the global investment bank believes Ether has a “high chance of overtaking Bitcoin as a dominant store of value.”
The report noted the growth of the burgeoning decentralized finance and nonfungible token ecosystems being built on Ethereum, as well as ETH’s dominance over Bitcoin by total transaction volume.
Grayscale Bitcoin Premium Rebounds As BTC Price Falls Below $35K — What Does It Mean?
A recent market outlook published by Glassnode shows institutions are returning to the Bitcoin market after May 19 crash.
Bitcoin (BTC) has crashed by around 44% from its all-time high of $64,899, signaling an end to its second-largest bull run that started in March 2020.
Many analysts, including those from BiotechValley Insights, see “terrible technicals” in the Bitcoin market, noting that the flagship cryptocurrency could extend its ongoing decline until $20,000.
Nevertheless, Glassnode Insights, a weekly newsletter issued by on-chain data analytics service Glassnode, anticipates a Bitcoin price recovery in the sessions ahead, based on an on-chain indicator that serves as a metric to gauge institutional interest in the cryptocurrency.
Enough With Discounts
Dubbed as Grayscale Premium, the metric tracks the capital flows into the Grayscale Bitcoin Trust (GBTC) — the largest investment vehicle for institutional investors looking to gain exposure in the Bitcoin market.
A rising Grayscale Premium shows a higher bitcoin inflow into Grayscale Bitcoin Trust. That prompts GBTC to trade at a premium with respect to the BTC spot price. Conversely, a lowering Grayscale Premium conveys a declining BTC inflow, prompting GBTC to trade at a discount to Bitcoin spot pricing.
The Grayscale Bitcoin Trust attracted more than 50,000 BTC to its reserves throughout January 2021 and the first half of February 2021. GBTC traded at a 10-20% premium in the said period, showing a rising institutional interest.
Nevertheless, the premium fell below 10% in the first half of February. GBTC started trading at discounts to spot pricing. The same period saw the BTC/USD spot rate climbing from lower $30,000s to almost $65,000 in April. By then, GBTC premium had flipped below zero.
On May 13, just ahead of the Elon Musk-led Bitcoin market crash on May 19, the GBTC premium reached a peak low of 21.23%. It showed that institutional demand for bitcoin investment products had softened since late February.
But the May 19 price crash improved the Grayscale Premium, noted Glassnode Insights. The metric recovered to -3.8%, suggesting that institutional interest, “or at the very arbitrage trader conviction,” rose in tandem with declining Bitcoin spot prices.
The Canadian Purpose Bitcoin ETF underwent a similar discounting trajectory, witnessing consistent capital inflows through late April and early May and outflows later in a sign of weakening institutional demand. Glassnode noted:
“However, similar to GBTC, demand flows appear to be recovering meaningfully in following the price correction with inflows back on the rise as of late-May.”
Buying The Bitcoin Price Dip?
The contrast between lower Bitcoin spot rates and recovering GBTC prices conveyed that institutions have not outright abandoned the crypto market. Instead, it shows that the sell-off has motivated investors to gain exposure in both Grayscale Bitcoin Trust and Canadian Purpose Bitcoin ETF. Glassnode wrote:
“Institutional products GBTC and the Purpose ETF are showing signs of recovery despite collapsing prices providing early signs of renewed institutional interest.”
The analytics portal also referred to metrics that showed that the majority of sellers in the latest BTC price run-down appeared to be short-term holders. Meanwhile, long-term holders bought the price dip “with conviction.”
Why Is Wall Street Becoming Less Interested In Grayscale’s Bitcoin Trust?
BTC demand via Grayscale Bitcoin Trust is dropping for several key reasons.
There is a reason why Grayscale Bitcoin Trust (GBTC) emerged as a benchmark to measure institutional interest in Bitcoin (BTC).
Grayscale No Longer The Only Option For Investors
The digital currency investment product was among the only ones that offered hedge funds, endowments, pension funds and family offices a way to gain exposure to Bitcoin without needing them to own the digital asset themselves.
Therefore, a rising capital inflow into GBTC — such as the one reported last year, wherein Wall Street investors deposited about $18.2 billion in the fund — served as a metric to gauge growing institutional interest in the crypto sector. Conversely, a declining capital inflow reflected institutional withdrawal or profit-taking, like the one happening since the first quarter of 2021.
On-chain analytics service Skew reported Thursday that GBTC stopped attracting fresh investments after February 2021. The capital inflows paused right when GBTC started trading at a negative premium to its net asset value, or NAV. NAV represents the underlying market value of the holdings.
The GBTC premium was upward of 30% at the beginning of this year. But the latest Skew chart pinpoints it at -11.40%. GBTC’s premium to its NAV was –40.20% at its sessional low, its worst level in history.
Meanwhile, GBTC premium logged mild recoveries in early April after Grayscale announced its intentions to convert its trust structure to an exchange-traded fund. The New York firm’s decision came in the wake of growing competition from then-newly launched ETFs in Canada, primarily as they offered better expense ratios than Grayscale’s.
For instance, Purpose, the world’s first physically settled Bitcoin ETF, surfaced with an expense ratio of 1%. Evolve and CI Galaxy, other Canadian Bitcoin ETFs, offered 0.75% and 0.40%, respectively. Meanwhile, Grayscale’s expense ratio was a heightened 2%.
Business rivalries with Canadian Bitcoin ETFs might have also choked capital inflows into GBTC. Purpose, for instance, raked in $1 billion in capital per month after its launch in February, reflecting that demand for Bitcoin investment products remained higher despite a plunge in GBTC’s inflows.
Musk Rattled Wall Street Bitcoin Investors
The period also saw Bitcoin’s spot rate riding higher on the Elon Musk factor. Following Tesla’s revelation that it was holding $1.5 billion worth of BTC on its balance sheets, the cost to purchase one Bitcoin rose from as low as $38,057 on Feb. 8 to as high as $64,899 on April 14, with speculators believing that more corporates would replace a portion of their cash holdings with the flagship cryptocurrency.
But GBTC premium stayed negative during the course of Bitcoin’s February–April price rally. Its minus 40.20% bottom appeared when BTC/USD started shedding its gains owing to profit-taking, China’s crypto ban and Tesla’s Bitcoin dump rumors.
Daniel Martins, founder of independent research firm DM Martins Research, highlighted the decline as a sign of waning Wall Street interest in Bitcoin-related investments, especially after the cryptocurrency became a clear victim of Musk’s anti-Bitcoin tweets mid-May, losing more than half its valuation at one point later.
Martins further noted that Grayscale reported 500% higher annualized returns than Nasdaq, but its correction was also worse than the 2008’s recession — 82% vs. Nasdaq’s 17%. That made Grayscale’s Bitcoin investment product an “ultra-leveraged bet,” accompanied by an inferior risk-adjusted performance. The analyst added:
“GBTC’s volatility has been nearly nine times as high as the Nasdaq’s: 145% vs. 17%.”
Grayscale ETF In 2021?
Martins’ statements highlighted possibilities that GBTC premium could face further downside moves as investors hunt for more stable alternatives against Bitcoin’s ongoing price correction.
Moreover, its rivalry from other digital currency investment alternatives, including cryptocurrency custodian services that offer institutional investors to own real crypto assets at a cheaper fee, further risks limited capital inflow.
ETF.com’s analyst Sumit Roy wrote that the Grayscale fund’s potential transition into an ETF ends its 2%-fee days, as it would need to compete with an army of other ETFs, led by firms such as Bitwise, Vanguard, Fidelity, Cboe and others. He added:
“Yet regardless of what happens, GBTC is poised to be a force and will likely stick around no matter how the crypto fund space evolves.”
But whether the United States markets will have access to a Bitcoin ETF in 2021 remains a mystery itself. Financial Times reported earlier this week that most ETF applications gather dust as the U.S. Securities and Exchange Commission Chair Gary Gensler reiterated worries about investor protection in crypto markets.
“I expect that [delay] to happen with all of our filings, to be honest,” said Laura Morrison, global head of listings at Cboe.
GBTC Premium Stays Negative, Suggests Bitcoin Price Sentiment Still Low?
GBTC premium stays negative for over three months as its holdings decline gradually, while BTC price struggles around the $37,000 mark.
Bitcoin (BTC) is facing difficulty breaching the $40,000 mark again after briefly crossing it on May 26. The cryptocurrency is currently exchanging hands at around the $36,000 mark, which is a 44% drop from its all-time high of $64,889 on April 14. Among others, a key difference between macroeconomic conditions affecting the cryptocurrency market as a whole is institutional demand.
One of the key investment vehicles for set demand is the Grayscale Bitcoin Trust (GBTC), a BTC trust of Grayscale Investments, one of the most significant investment managers for institutions indulging in digital currencies. The trust allows investors to have exposure to the price of Bitcoin through a regulated traditional investment vehicle without having to buy, store and safe-keep their token directly.
GBTC trades publicly on the OTCQX, an over-the-counter marketplace that enables stock trading. GBTC currently trades in the $30 range, 46% down from its all-time high of $58.22 on Feb. 19.
Each share represents 0.00094716 BTC, with the share tracking Bitcoin’s market price, excluding the applicable fees and expenses. It has a minimum holding period of six months and a minimum investment requirement of $50,000, entailing that it is not ideally suited for retail investors.
Grayscale BTC Premium Negative For Over Three Months
Due to implications of institutional demand that backs Grayscale and the fact it’s a regulated way of gaining exposure to Bitcoin, its products usually trade at a premium to the net asset value (NAV), or the current value of the holdings. The GBTC premium refers to the difference between the value of the assets held by the trust against the market price of those holdings.
Before Feb. 23 of this year, this difference was always a positive number indicating a premium that hit its all-time high of 122.27% four years ago on June 6, 2017. Since the end of February this year, the premium has turned into a discount reaching an all-time low of -17.89% on May 16.
Since this difference is driven by supply and demand factors in the market, a rising GBTC premium shows a higher inflow of Bitcoin into the trust, while a decreasing premium transitioning into a discount indicates a declining BTC inflow entailing that GBTC trades at a discount to spot price of Bitcoin.
Cointelegraph discussed the implications of the change of the GBTC premium trend with Nikita Ovchinnik, chief business development officer of 1inch Network — a decentralized cryptocurrency exchange. Ovchinnik said, “It looks like GBTC premium is a very good indicator of medium-term market sentiment.
The premium turned negative at the end of April, and while the digital assets experienced a local boom, lack of institutional interest predicted May’s market cap shrinkage.”
This trend is consistent with the number of Bitcoin the Grayscale trust has in its holdings, as it has been increasing gradually since Jan. 13 to reach its all-time high of 655,702.89 tokens on March 2. Since then, its Bitcoin reserves have been on the gradual decline for the first time ever to the current levels of 652,410.55 as of June 4. The trust currently has an AUM of $24.27 billion.
The premium allows investors to leverage this opportunity through arbitrage opportunities. One way is for investors to borrow Bitcoin and use it as an exchange for GBTC shares. Once the six-month lock-up period ends, investors can sell the shares in the secondary market at the prevailing premium.
With the funds they receive in this exchange, they purchase and give back the borrowed BTC tokens to the lender. In this process, investors pocket the difference in price created due to the premium, thus successfully executing their arbitrage.
Ovchinnik Further Opined:
“GBTC is one of the most convenient and secure points of entry for institutional funds. It looks like their demand was one of the drivers early in 2021, but it slowed down and we no longer hear new entities claiming that they have decided to diversify and are trying to hold blockchain assets.”
In the traditional financial markets, the GBTC premium/discount can be compared to the pricing of closed-end mutual funds. Ideally, since the amount of Bitcoin by the trust is publicly disclosed, the value of the trust should amount up to exactly that value. Due to the aforementioned premium/discount factors, the value is not the same.
Bryan Routledge, associate professor of finance at Carnegie Mellon University’s Tepper School of Business, told Cointelegraph that the “premium reflected its position as a ‘regulated’ alternative to owning Bitcoin,” thus, “an investor would pay a premium for the access via a trust.” Routledge also added that the GBTC premium shouldn’t be perceived as an additional cost:
“If you buy and sell and the premium is the same, the impact is minimal. Recently, there are more easy and comfortable ways to access Bitcoin, so the premium in Grayscale has fallen. It is now at a discount relative to Bitcoin NAV.”
Despite GBTC trading as a discount in relation to NAV, there have been a few positive signs in the recent trend. The GBTC discount rebounded sharply between May 21 and May 24 from -21.23% to -3.86% before falling to around -12% as of June 3. This indicates that institutional interest is rising in tandem with reducing Bitcoin prices between these days.
The direction in which the GBTC premium/discount moves could work as an indicator of market sentiment in the asset, especially among institutional investors.
Bitcoin ETFs A Close Competitor To GBTC
In addition to GBTC, another route for institutional and retail investors alike to gain exposure to Bitcoin’s price volatility through a regulated channel is Bitcoin exchange-traded funds.
Purpose Investments launched North America’s first-ever Bitcoin ETF on Feb. 18, which saw the assets under management (AUM) rise to over $500 million in under a week and subsequently crossed $1 billion in the same month. The ETF’s AUM currently stands at $714.6 million or 19,407.63 Bitcoin as of June 4 and uses the ticker BTCC.
In addition to Purpose’s BTC ETF, Evolve ETFs launched its own Bitcoin ETF on Feb. 19 with the ticker EBIT. Although it lost out on the first-mover advantage that Purpose’s ETF gained, it currently has assets under management of $78.52 million, which is just over 12% of BTCC’s current AUM. Overall, there are several notable ETFs listed on the Toronto Stock Exchange.
What’s interesting to note about these ETFs is that the timing of their launch coincides with a decrease in the GBTC premium, which eventually turned into a discount. Routledge mentioned why this could be the case, “ETFs are a cheaper (transaction costs, fees) way to Bitcoin exposure. So, the premium on Grayscale has fallen — reflecting good old-fashioned competition.”
The GBTC trust has a management fee of 2%, while the Purpose BTC ETF has a management fee of 1%, and the Evolve ETF fee is even less at 0.75%. Due to the success of the existing Canadian ETFs, the lure of the ETF market is such that even Grayscale has confirmed that it will be turning its products into ETFs instead.
But before that, they would need the much elusive approval from the United States Securities and Exchange Commission that several firms have already applied for, including Fidelity and SkyBridge. For Ovchinnik, the existence of these new products is “very important over the long-term horizon, even though we might not see changes instantly.”
The competition for the BTC ETF market share is set to heat up if the U.S. SEC approves any of the several crypto ETF applications it has received. Until that point, GBTC remains among the top indicators of institutional interest, with ETFs following at its heels and fighting for the same market participants.
Furthermore, as the GBTC remains closed for new investments until September this year, drastic changes to the current GBTC discount are not expected, but a spell of positive trends as noticed between May 21 and May 24 could bring good news for the lack of institutional demand felt in the market.
Digital Currency Asset Manager Grayscale Investments LLC Hires Its First CMO
Deborah Bussière Is Joining Grayscale Investments As Its First Chief Marketing Officer.
Deborah Bussière will promote investment products in a noisy sector of finance.
Grayscale Investments LLC, a digital currency asset manager, has named Deborah Bussière as its first chief marketing officer.
Grayscale, which offers over-the-counter funds focused on bitcoin and other digital currencies, had $53 billion in assets under management as of May 12, according to the company. Responsibility for marketing was previously shared internally, with external support from Vested LLC, its advertising and public relations agency of record.
Previously, Ms. Bussière was global chief marketing officer at Broadridge Financial Solutions Inc., a financial-technology provider of investing, governance and communications tools. She had earlier been a marketing consultant to startups including Grayscale and chief marketing officer for the Americas at Ernst & Young.
Ms. Bussière said she intended to help Grayscale educate investors about digital currency as it continues to quickly evolve. “We understand how important it is to navigate the many perceptions and misperceptions that exist,” she said.
She joins the company following the January promotion of Michael Sonnenshein to chief executive officer at Grayscale, where he promised to bolster the leadership team and capitalize on the company’s growth in 2020.
Her appointment to the C-suite at Grayscale comes, too, as digital currencies occupy the spotlight more than ever, most recently as the subject of a “Saturday Night Live” skit starring Elon Musk last month and an enthusiastic conference in Miami earlier this month.
The “laser eyes” social-media meme for bitcoin enthusiasts was adopted this week by the president of El Salvador, which this week approved bitcoin as legal tender.
But the currencies are also volatile, buffeted by forces including tweets by Mr. Musk and the sentiment in Reddit forums such as WallStreetBets. Bitcoin, dogecoin and other cryptocurrencies saw their value decline on Friday, continuing a monthlong drop, after Mr. Musk posted a cryptic tweet implying loss of love for bitcoin, including “#bitcoin” and a broken-heart emoji.
The crosscurrents are a challenge, according to Ms. Bussière. “Perception is reality,” she said. “That’s a fact of life.”
But she said her response to such external factors will be Marketing 101, with a consistent message at its core. “We’re monitoring real-time tweets, news breaks, price fluctuations, market valuations,” Ms. Bussière said. “But it’s like when you’re running a race.
If you want to win you’re not constantly looking back at who’s behind you because if you do that you’re losing valuable milliseconds.”
Marketing cryptocurrency also depends in part on the audience, Ms. Bussière added.
“If you’re in the digital currency and crypto space, it can be Reddit and it can be all the kids that are out there,” she said. “Certainly if you go to talk to your Great Aunt Edna about her perception of digital currencies, that’s a whole different vantage point…Grayscale has a huge opportunity to own that narrative.”
Other players in digital currencies are confronting the same issues.
“We’ve actually surveyed for this—‘Do you find the crypto culture to be off-putting?’” said Andrew Tam, senior vice president of marketing at BlockFi, which offers cryptocurrency versions of traditional financial products and services such as loans. “It scored lower than expected.”
Tweets by Mr. Musk and the laser eyes meme among bitcoin backers help business in the long run, Mr. Tam said.
“It seems kind of silly because if you log onto Twitter you see all these people with laser eyes,” he said. “What that really is is engagement. What that campaign, quote-unquote, has done is really drive awareness in a way that a centralized marketing department could never have done.”
Mati Greenspan, chief executive at research firm Quantum Economics, agreed. “In a lot of ways cryptocurrencies’ value are based on the network effect,” he said. “When you see things like presidents and presidential advisers adding laser eyes, that adds greatly to the network effect, which in turn adds to the value.”
Bitcoin Sell Pressure May Hit Zero In July Thanks To Grayscale’s Giant 16K BTC Unlocking
The biggest single unlocking day will flush sellers from the market in July, opening up both volatility and bullish potential.
Institutional Bitcoin (BTC) investors are in the spotlight as an upcoming major cashout date sparks talk of fresh price volatility.
As noted by popular Twitter commentator Loomdart and others this week, attention is focusing on buyers and sellers of the Grayscale Bitcoin Trust (GBTC) as Bitcoin hovers near $40,000.
July Means BTC Price Volatility
A giant in the institutional Bitcoin space, GBTC has over $24 billion in assets under management.
It is not available constantly — as Cointelegraph reported, the trust operates with periodic closures, which this year have coincided with its buy-in price trading at a discount to spot price.
This negative “GBTC premium” has formed a major talking point in its own right, as invested funds are locked up for a set period and then released, allowing investors to cash out at certain times depending on when they bought in.
A combination of negative premium relative to spot and a large unlocking of funds means that July will be particularly interesting for BTC price action. Previously, such an alignment has meant increased volatility.
July 19 will see the biggest single unlocking day, with 16,000 BTC ($627 million) released.
Bucking A Declining Trend
For popular pseudonymous trader Loomdart, this nonetheless provides a chance for selling pressure to stabilize afterward, paving the way for BTC bulls to crush longstanding resistance lines.
This would form a refreshing counterpoint to the broadly bearish picture on institutional markets, with open interest in Bitcoin futures way down versus prior to the May price dip to $30,000.
On-chain analytics resource CryptoQuant noted the decline in interest last week, something which, in turn, came in tandem with a dramatic decline in overall BTC transaction numbers.
Bitcoin Price Dips Below $34K As Day Of Grayscale’s Giant BTC Unlocking Draws Near
Downward volatility hits the market on Sunday as market participants argue that most of the drop is already complete.
Bitcoin (BTC) dropped to local lows of $33,750 on Sunday as fears over weak support levels proved to be well-founded.
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD swiftly dropping below $34,000 on Sunday after choppy behavior at the start of the weekend.
A comedown from resistance at near $40,000 continued to unfold, with low volumes highlighting little interest in protecting price action much above $30,000.
Orderbook data from Binance confirmed this on the day, with sellers eradicating a major buy wall above $36,500 to leave the next significant support level at just $31,000.
Among traders, talk mostly revolved around the so-called “death cross” on the BTC/USD daily and hourly charts, which occurred on Friday. This refers to the 50-day moving average crossing over the 200-day moving average, and it is traditionally considered to be a bad omen for price stability.
Historically, not all death crosses have resulted in losses — as Cointelegraph reported, some are followed by bullish phases.
“A death cross is overrated,” popular trader Crypto Ed summarized earlier in the week.
“The only thing it’s telling you is that you are very late when opening shorts. Most of the down moves already happen before the cross.”
In a separate commentary, Adam Back, CEO of Blockstream, likewise took Twitter users to task over the negative skew given to death cross events.
At the time of writing, however, Bitcoin nonetheless traded down 5% on the day, while three-day losses totaled over 14%.
Liquidations were mounting on exchanges, with almost $150 million of positions gone in just a single hour after a flash dip of around $800.
Grayscale Investors Get A Sell Opportunity
Another theory about price direction involved an impending “unlocking” phase at institutional giant Grayscale.
As Cointelegraph previously noted, the coming weeks will see a large chunk of investor funds released after a six-month lock-up period, with the potential for selling pressure to therefore increase as accredited investors seek to offset some of their losses (realized after selling their GBTC shares) by selling BTC on the spot market.
“Between mid-April 2021 to today there have been 139.5K BTC (GBTC) in unlockings,” explained Decentrader analyst Tonald Dusk.
“I anticipate price to decline again in mid-July as there remains a further 140K GBTC to be unlocked.”
Thereafter, by contrast, there should be a reduction in potential sell-side activity after the summer — at least from GBTC — if these unlockings have indeed put downward pressure on price since the mid-April all-time highs.
Fundamentals See Increasing Retracement
A look at network fundamentals, meanwhile, gave additional cause for concern. The hash rate, already in flux thanks to shifts in miner distribution, fell below 100 exahashes per second (EH/s), having previously hit a peak of 168 EH/s.
Other estimates, while not exact, also depicted the hash rate downtrend.
Difficulty, fresh from two consecutive downward adjustments, was on track for a third leg down of around 9.7% at the next in around nine days’ time.
The last time that Bitcoin saw three downward difficulty adjustments in a row was during the capitulation phase of the previous bear market in late 2018.
Morgan Stanley Equity Fund Owns 28.2K Shares Of Grayscale Bitcoin Trust, Per SEC
The investment bank reported owning a significant stake in GBTC as of April 30, according to a recent filing with the SEC.
Wall Street investment bank Morgan Stanley has gained exposure to Bitcoin (BTC) through Grayscale, offering further evidence of wider institutional acceptance of digital assets.
The Morgan Stanley Europe Opportunity Fund, which invests in established and emerging companies throughout Europe, owned 28,298 shares of the Grayscale Bitcoin Trust, or GBTC, as of April 30, according to a June 28 filing with the United States Securities and Exchange Commission. At a current GBTC price of $29.68, Morgan Stanley’s exposure is worth roughly $840,000.
The exposure was worth over $1.3 million at the end of April, according to the filing.
Morgan Stanley’s Europe Opportunity Fund is designed to seek maximum capital appreciation by investing in assets that “the investment team believes are undervalued at the time of purchase.”
Grayscale is by far the world’s largest crypto asset manager, with $29 billion in assets under management. The Grayscale Bitcoin Trust accounts for the lion’s share of assets at over $21.7 billion.
As Cointelegraph reported, Morgan Stanley has been seeking more direct exposure to Bitcoin this year. In April, the investment bank added Bitcoin exposure to 12 investment funds through Grayscale and cash-settled futures.
At the time, the Europe Opportunity Fund was not listed as a potential target for Bitcoin investments. However, the firm did include several “Opportunity” portfolios targeting Asia and global markets.
Earlier this month, Morgan Stanley made its first capital investment into blockchain by co-leading a $48 million Series B financing round for Securitize, a Coinbase-backed tokenization platform.
Is Bitcoin In Danger Of Losing $30K With Grayscale’s Big GBTC Unlocking In Two Weeks?
Bitcoin prices remain under pressure in the $30,000-$40,000 zone as traders brace for the 16,000 BTC worth of GBTC shares unlocking in July.
Whether a potential sell-off of shares tied to a multi-billion dollar Bitcoin (BTC) investment fund could crash the cryptocurrency’s spot prices has turned into a hotly debated topic among the analysts in the space.
Grayscale’s Premium Remains Negative For Months
The argument concerns Grayscale Bitcoin Trust, the world’s largest digital assets manager that allows institutional investors to gain indirect exposure in the Bitcoin market through its product, GBTC. Investors purchase GBTC shares directly via Grayscale in daily private placements by paying in either Bitcoin or the U.S. dollar.
Nevertheless, investors can sell their GBTC shares only after a six-month lockup period in secondary markets to other parties. Therefore, they anticipate liquidating at a premium when the market price at the time of sale crosses above the native asset value (NAV).
On the other hand, liquidating GBTC shares when the market price has dipped below the NAV brings losses. So if investors decide to dump their GBTC holdings, they would have to do so for a financial casualty. That is because the share has been trading at a discount, i.e., under its NAV, since February 24, 2021.
Some analysts, including strategists at JPMorgan, believe that accredited investors will sell at least a portion of their GBTC holdings after the July unlocking period, thus weighing further on the ongoing Bitcoin market downtrend.
“Despite this week’s correction, we are reluctant to abandon our negative outlook for Bitcoin and crypto markets more generally. So despite some improvement, our signals remain overall bearish,” said Nikolas Panigirtzoglou, the lead strategist at JPMorgan, in a note to clients.
Nevertheless, other analysts believe that the event will flush sellers from the market in July, opening up both volatility and bullish potential to break new all-time highs.
Is Bitcoin Price Correlated To Grayscale Unlock Dates?
It is the GBTC shares that were scooped up by investors at around 40% premium in December 2020, explained Panigirtzoglou. The month saw Grayscale Bitcoin Trust attractive inflows of $2 billion, followed by $1.7 billion in January.
That means about 140,000 Bitcoin worth of shares will get unlocked by the end of July. About 139,000 Bitcoin have already been released between mid-April to mid-June, a period that also coincided with spot BTC/USD’s crash from around $65,000 to as low as $28,800.
Lyn Alden, the founder of Lyn Alden Investment Strategy, noted the correlation between the spot Bitcoin price crash and its Grayscale’s GBTC unlocking periods, noting that the same could happen as more shares get unlocked in July.
Alden hinted that the correlation pointed to a deceleration of Grayscale’s “neutral arbitrage trade.”
In arbitrage trade, institutional investors (like hedge funds) borrow Bitcoin to purchase GBTC shares. Then, after the lock-up expires, these investors sell GBTC shares to secondary markets to retail investors, typically for a premium. Then, they return the borrowed Bitcoin to their lenders and pocket the difference.
“Part of the run-up in the second half of 2020 was due to the Grayscale neutral arbitrage trade, sucking in a ton of bitcoin,” Alden tweeted late Monday, adding:
“When ETFs and other new ways to access bitcoin made GBTC less unique, the premium went away, so the neutral arb trade went away.”
But, according to David Lifchitz of ExoAlpha, arbitrage strategy might have contributed to but did not cause the Bitcoin price plunge.
The chief investment officer noted that the real GBTC arbitrage trade strategy is for investors with deep pockets. That is because they would require to hold the short Bitcoin position during the GBTC lockup period — the overtime costs would risk offsetting the price differential that was arbitrage away.
“And for the simple buyers of GBTC shares at a discount vs. BTC who didn’t sell short BTC against, their profit depends on the price at which they bought GBTC: if they bought between $40K and $60K, they are in the red today… and may not want to sell just yet and lock-in their loss,” he told Cointelegraph.
Michael Sonnenshein, the chief executive of Grayscale, told Barron’s that investors buy the GBTC shares with a medium- to long-term outlook. So they might not want to dump their holdings immediately upon its unlocking.
“I would generally say that investors certainly are going to think about where the price of the shares is, relative to net asset value or relative to Bitcoin before they would think about getting any liquidity.”
First Midwest Bank Trust Division increases Grayscale Bitcoin Trust Holdings By 283%
A report on the firm’s holdings to the SEC for Q2 2021 revealed the bank’s trust division had 29,498 shares in Grayscale’s Bitcoin Trust, worth more than $880,000.
Illinois-based financial services company First Midwest Bank’s trust division has reported it held 29,498 shares of Grayscale’s Bitcoin Trust as of the second quarter of 2021.
According to an institutional investment manager holdings report filed by the First Midwest Bank Trust Division to the U.S. Securities and Exchange Commission, the company increased its shares of Grayscale’s Bitcoin (BTC) Trust by more than 283% over that of the first quarter of 2021, from 7,693 shares at the end of March to 29,498 shares in two separate lots on June 30.
First Midwest reported the holdings were worth $880,000 at the time of filing, but they have since fallen to roughly $803,000. The share price of Grayscale’s BTC Trust, or GBTC, has dropped by more than 22% this year, from $35.08 on Jan. 4 to $27.18 at the time of publication. The asset has been trading at a roughly 15 to 20% discount to its Bitcoin holdings.
Cointelegraph reported yesterday that major institutional investment managers were still seemingly showing confidence in cryptocurrency despite recent volatility. Nickel Digital CEO Anatoly Crachilov said 19 listed companies with a market cap of more than $1 trillion “had around $6.5 billion” currently invested in Bitcoin. First Midwest holds $14 billion in assets under management, so its GBTC shares represent less than 0.006% of its AUM.
Grayscale is expected to “unlock” more than 16,000 Bitcoin related to its BTC trust on July 18. Though the investment manager regularly unlocks such funds, the event scheduled in less than two weeks is expected to be the largest, with 16,240 BTC becoming available, or roughly $536 million at the time of publication.
Grayscale’s Diversified Crypto Fund Becomes SEC-Reporting Firm
Grayscale publicly filed three Form 10 registration statements on behalf of Grayscale Bitcoin Cash Trust, Grayscale Ethereum Classic Trust and Grayscale Litecoin Trust.
Cryptocurrency asset manager Grayscale Investments continues reinforcing its commitment to digital currency investment products with a new filing with the United States Securities and Exchange Commission, or SEC.
The company announced Monday that it has filed a Form 10 registration statement with the SEC on behalf of its Grayscale Digital Large Cap Fund (GDLC) to become an SEC reporting company.
Grayscale’s diversified digital currency investment fund will now file its reports and financial statements as 10-Qs and 10-Ks with the SEC, along with current reports on Form 8-K, in addition to “complying with all other obligations” under the Exchange Act, the firm said.
Additionally, accredited investors who purchased shares in the fund’s private placement will acquire an earlier liquidity opportunity, as the holding period for the applicable private placement shares would be cut from 12 months to six months under Rule 144 of the Securities Act.
Grayscale also announced that it has publicly filed three additional registration statements on Form 10 with the SEC on behalf of other funds, including Grayscale Bitcoin Cash Trust, Grayscale Ethereum Classic Trust and Grayscale Litecoin Trust. The company already has two SEC reporting products, including Grayscale Bitcoin Trust and Grayscale Ethereum Trust, the firm noted. The new Form 10 filings are voluntary and are subject to SEC review, Grayscale added.
Craig Salm, Grayscale’s vice president of legal, noted that the company’s new SEC filings show that there is “continued investor interest in gaining exposure to the growing digital currency ecosystem within existing regulatory frameworks, and that regulators continue to engage with market participants in the asset class.”
Launched in 2018, GDLC is an open-ended fund that provides market cap-based exposure to six major cryptocurrencies including Bitcoin (BTC), Ether (ETH), Cardano (ADA), Bitcoin Cash (BCH), Litecoin (LTC) and Chainlink (LINK). As of July 1, each share of the GDLC basket includes a 67.47% share of Bitcoin, 25.39% of Ether, and 4.26% of ADA.
Grayscale Bitcoin Fund Advances ETF Plans With New Partnership
The largest Bitcoin fund is ramping up its ETF ambitions through a new agreement with Bank of New York Mellon Corp.
Grayscale Investments LLC will use BNY Mellon for exchange-traded fund services upon the hoped-for conversion of its $21.5 billion Grayscale Bitcoin Trust (ticker GBTC), according to a statement on Tuesday. Starting Oct. 1, BNY Mellon will also begin fund administration services for GBTC in its current form.
“Our business has been undertaking any and all initiatives we possibly can to ready this product for an ETF conversion,” said Michael Sonnenshein, chief executive officer of Grayscale Investments, in an interview. “We want the cohort of service providers surrounding this product to all be working with the product, ready for that ETF conversion.”
The company said in early April that it’s “100% committed” to converting GBTC into an ETF as soon as U.S. regulators allow. Still, that may be a while, as the U.S. Securities and Exchange Commission continues to express concerns about the lack of oversight in crypto exchanges, and has pushed back the deadlines for approving applications.
BNY Mellon To Provide ETF Services For Grayscale’s Bitcoin Trust
The new agreement further reinforces Grayscale’s commitment to converting Grayscale Bitcoin Trust into an ETF as its strategic goal.
The bank of New York Mellon (BNY Mellon), America’s oldest bank, has signed an agreement with cryptocurrency asset manager Grayscale Investments to provide a set of services to its flagship Bitcoin (BTC) investment product.
Grayscale officially announced Tuesday that it selected BNY Mellon as an asset servicing provider for Grayscale Bitcoin Trust (GBTC), a major digital currency investment product providing indirect exposure to Bitcoin.
BNY Mellon is also expected to provide transfer agency and exchange-traded fund-related services for the GBTC upon its conversion to an exchange-traded fund, or ETF, Grayscale noted. As part of the agreement, BNY Mellon will provide GBTC with fund accounting and administration effective Oct. 1, 2021.
The agreement aims to further improve Grayscale’s GBTC in terms of scalability, resiliency and automation through BNY Mellon’s platform, including the bank’s proprietary ETF center that offers technology specifically designed to support digital asset ETFs. The new development is also an important milestone for Grayscale as it reinforces the company’s commitment to converting GBTC into an ETF as its strategic goal, Grayscale CEO Michael Sonnenshein said.
Roman Regelman, CEO of asset servicing and head of digital at BNY Mellon, noted that the bank’s relationship with Grayscale “stands squarely at the intersection of trust and innovation.”
“It’s another critical milestone in our rapidly growing digital asset capabilities and broader strategy of putting client choice at the center of everything we do,” he added.
Grayscale’s GBTC is not the only potential ETF that is expected to involve BNY Mellon’s expertise. In 2019, BNY Mellon was appointed to serve as transfer agent and administrator of Bitwise Asset Management’s proposed Bitcoin ETF.
As previously reported, United States regulators have not yet approved a Bitcoin ETF, having delayed multiple regulatory decisions on such products in recent months. Other global jurisdictions like Canada and Brazil have already launched several Bitcoin ETF products, including ETFs by Canadian asset manager 3iQ, European firm CoinShares and Brazilian asset manager QR Asset Management.
Grayscale ‘100% Committed’ To Turning GBTC Into Bitcoin ETF — CEO
Bitcoin is just a “couple of points of maturation” away from getting an approved ETF in the U.S., says Grayscale CEO.
The head of crypto investment giant Grayscale believes that only a “couple of maturation points” separate the United States from its first Bitcoin (BTC) exchange-traded fund (ETF).
Speaking to CNBC on July 19, Michael Sonnenshein reiterated that a U.S. ETF is a matter of “not ‘if,’ but ‘when.’”
Sonnenshein: “If, Not When” For U.S. Bitcoin ETF
Regulators currently have 13 ETF applications under consideration, and the U.S. lags behind neighboring Canada when it comes to giving them the green light.
Years of applications and rejections have gone by, and some believe that an ETF would ultimately create bearish price pressure for Bitcoin in the long term.
Nonetheless, Grayscale CEO Sonnenshein says the firm is “100% committed” to transforming its Bitcoin product, the Grayscale Bitcoin Trust ($GBTC), to ETFs once conditions are right.
“I think in our seat, from our view of the world, we’re really looking for a couple of different points of maturation in the underlying market, and that’s really the final stages of what we think regulators need to approve those types of products and give investors the protections that they’re looking for,” he told the network.
Last week, Grayscale announced a partnership with U.S. banking giant BNY Mellon, which will now provide services for GBTC when it undergoes its metamorphosis.
GBTC is already in the headlines in crypto circles over its unlocking events, the largest of which occurred Sunday, with opinions mixed over their potential price impact.
Not All Quiet On The Western Front
Institutional advances continue to surface this month despite low volumes and overall lack of direction on the market.As Cointelegraph reported, Bank of America reportedly gave the green light for Bitcoin futures trading last week.
A survey meanwhile showed that existing institutional BTC investors are far from done with the asset, with 40% saying they plan to buy more in future.
Sunday’s GBTC Unlock Held More Shares Than The Remaining Events Combined
Even if unlocking events were able to directly spark Bitcoin sell-offs, the worst is easily over, data shows.
Bitcoin (BTC) is rebounding despite the ongoing Grayscale Bitcoin Trust (GBTC) unlocking events — and most shares are already released.
According to data from tracking resource Bybt, the remaining unlockings combined involve fewer shares than those released on just one day last weekend.
Putting An End To GBTC “FUD”
Sunday saw around 16,240 BTC worth of GBTC shares end their six-month lock-up period. The largest such release in a single day, the event saw a hefty build-up, with arguments raging over its likely impact on the Bitcoin price.
Monday’s BTC price dip was timely when it came to GBTC, fitting a narrative that a sell-off would follow such large releases.
Even if that were true, Bitcoin hodlers now have a silver lining — unlockings are only scheduled until Aug. 25, and the outstanding shares are fewer in number than Sunday’s tranche.
In reality, however, supporting evidence for unlockings resulting in sell-offs is lacking. As various sources stress, Bitcoin markets themselves are in fact left out of such events altogether — GBTC shares cannot be redeemed for BTC, which could then theoretically be dumped for cash or stablecoins.
“Grayscale just had the biggest GBTC unlock today and nothing exploded,” popular Twitter commentator Lark Davis wrote on Monday, citing the Bybt figures.
“One more big unlock on the 20th and then the whole GBTC crashing bitcoin narrative will be over. What FUD will they come out with next?”
That “FUD” had nonetheless infiltrated some of the best-known names in finance, including banking giant JPMorgan.
“Selling of GBTC shares exiting the six-month lockup period during June and July has emerged as an additional headwind for bitcoin,” a report claimed earlier this month.
CEO Confident Over GBTC Performance
As Cointelegraph reported, meanwhile, interest in GBTC and Grayscale’s other products remains.
Both Rothschild Investment Corp and Ark Invest have added to their holdings in July, the latter boosting its Bitcoin exposure by an additional 310,000 shares.
“GBTC’s doing hundreds of millions of dollars a day in notional trading volume, and it really is the easiest way for many investors to add crypto exposure alongside stocks, bonds, ETFs, other things they may own,” Grayscale CEO Michael Sonnenshein told Bloomberg Monday.
A survey of institutions by asset manager Fidelity likewise revealed positive long-term approaches to cryptocurrency, with 71% of responses planning a market entry in the future.
GBTC Premium Matches Bitcoin Price Crash Levels As Unlocking Fear Fades
Funds are flowing back into GBTC, data suggests, as CEO Sonnenshein reiterates plans to turn Grayscale crypto funds into ETFs.
The Grayscale Bitcoin Trust (GBTC) is echoing bullish sentiment in Bitcoin (BTC) as its premium over spot price rises to its highest since May.
Data from analytics resource Bybt shows that on Tuesday, the so-called Grayscale premium stood at -5.88%. The last time it was closer to zero was on May 25.
GBTC Premium Slips Above -6%
That was a week after Bitcoin began a major price drawdown, which this week has finally shown signs of abating.
GBTC has been the subject of intense speculation since Bitcoin’s 55% price dip, with unlocking of GBTC shares allegedly capable of adding to selling pressure.
As Cointelegraph reported, such a premise is false by default, given restrictions in place on GBTC holders.
Nonetheless, interest in purchasing has resurfaced this month in particular, with conspicuous names adding to their tranche and increasing their Bitcoin exposure.
The Grayscale premium — the trading price of GBTC relative to the net asset value (NAV) of its BTC holdings — has increased in step, trending back to zero after an extended stay in negative territory.
With unlockings mostly complete, the narrative surrounding Bitcoin price suppression has all but disappeared.
“$GBTC premium has gone from -15% to -5% in 5 days,” trader and analyst Nick Hellmann commented on the latest changes.
“If $BTC can maintain these levels and have Grayscale premiums flip positive that will add fuel to this Bitcoin fire.”
Purpose Bitcoin ETF Holdings Hit Pre-Crash Levels
Despite mixed perceptions over GBTC, one figure decidedly not at all bearish on any timeframe is Grayscale CEO Michael Sonnenshein.
In the company’s latest mid-year shareholder letter, Sonnenshein reiterated previous public statements about his intent to turn GBTC, along with its altcoin-focused equivalents, into exchange-traded funds (ETF).
“We are 100% committed to converting Grayscale Bitcoin Trust (symbol: GBTC), Grayscale Ethereum Trust (symbol: ETHE), and our other investment products into ETFs,” the letter reads.
With the United States yet to approve a single Bitcoin ETF, neighboring Canada, which gave the green light to the first player, the Purpose Bitcoin ETF, has never looked back.
On Tuesday, Purpose’s assets under management jumped from $900 million Canadian dollars to $1.1 billion CAD — its highest since May 13.
$25B Investment Firm Adds ‘Riskier’ Grayscale GBTC And ETHE For Clients
Wealthfront users will now be able to have up to 10% of their portfolios composed of the Grayscale Bitcoin and Ethereum Trusts.
Bitcoin (BTC) and Ether (ETH) exposure has come to one of the world’s biggest automated investment firms.
In a blog post on July 29, Wealthfront, which has $25 billion in assets, confirmed that it had added two Grayscale funds to its suite of investment options.
GBTC Buzz Returns
The recent rise in cryptocurrency prices has kept institutional products such as Grayscale’s various funds in the spotlight.
Wealthfront, an example of a so-called “robo advisor” in the investments space, will now allow its clients exposure to the Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE).
“Buying cryptocurrency can feel intimidating — it takes time and effort to research all of the options, set up a wallet, and monitor an additional account. That’s why we’ve made it easy to get exposure to Bitcoin and Ethereum right in your Wealthfront portfolio, no wallets required,” the blog post explains.
“Instead of buying coins yourself, you can invest in GBTC and ETHE.”
Clients will be able to have up to 10% of their portfolio in Grayscale products, a limit the firm attributes to the “riskier and more volatile” nature of crypto products.
The move nonetheless reduces the ease-of-access dilemma faced by those interested in Grayscale’s funds, which are not always directly available, and place strict rules on shareowners.
Alongside Grayscale, meanwhile, Wealthfront increased its offering of exchange-traded funds (ETFs) from ARK Invest, itself a major GBTC stakeholder.
The announcement comes as institutional interest in Bitcoin in particular shows no signs of decreasing at prices around $40,000.
Grayscale Hires ETF Head To Convert Biggest Bitcoin Fund
The company behind the largest cryptocurrency fund is building out its ETF team, despite dimming odds that U.S. regulators will approve the structure this year.
Grayscale Investments LLC has tapped David LaValle, former chief executive officer of custom index provider Alerian, as its global head of exchange-traded funds. He will drive the effort to convert the $25 billion Grayscale Bitcoin Trust (ticker GBTC) into an ETF — a process that CEO Michael Sonnenshein has said the asset manager is “100% committed” to.
Grayscale has been ramping up its ETF arm even as the U.S. Securities and Exchange Commission drags its feet on allowing cryptocurrencies into the structure. In addition to LaValle’s hire, the firm is seeking to fill at least 10 other ETF-related roles.
Grayscale also announced last month that it would partner with Bank of New York Mellon for ETF services following GBTC’s conversion. The efforts reflect the firm’s ambition to become a leading ETF issuer, according to LaValle.
“We’re focused on creating a number of products to be a world-class ETF issuer,” he said in a phone interview. “We’re in a unique position. We actually have a product in the marketplace, so it puts us in a great spot.”
But Grayscale’s ambitions in the $6.7 trillion ETF universe expand beyond the realm of cryptocurrencies, LaValle said.
“We have ambitions to launch other ETFs, equity-based ETFs,” LaValle said on Bloomberg’s “QuickTake Stock” streaming program Wednesday. “We have the opportunity and we’re putting those building blocks in place to deliver investment theses in the form of index-based products, maybe it could be an actively managed product as well. Those are the decisions that we’re going through right now.”
If converted, GBTC would immediately become the third-largest commodity ETF. Only the $60 billion SPDR Gold Shares (GLD) and $29 billion iShares Gold Trust (IAU) command more assets, according to data compiled by Bloomberg.
Converting GBTC into an ETF would also likely solve a persistent problem for Grayscale: the trust’s discount. The product’s price has traded below its underlying Bitcoin holdings since March as the crypto craze cooled.
The discount is currently around 10%, after reaching 21% in May.
Exacerbating the situation is the fact the trust’s outstanding shares — which can’t be destroyed — ballooned by hundreds of millions over the past 12 months as Bitcoin soared to a record.
Converting to an ETF would mean that shares could be redeemed, allowing specialized traders known as authorized participants to arbitrage away the discount.
“A conversion to an ETF would very likely collapse that discount,” LaValle said.
Wealth Managers Gain Exposure To Bitcoin Via Grayscale, According To New SEC Filings
The Grayscale Bitcoin Trust, which trades under the ticker symbol GBTC, is being snatched up by institutional managers looking for more traditional exposure to digital assets.
New filings with the United States Securities and Exchange Commission, or SEC, reveal that four wealth management companies have acquired shares of Grayscale’s Bitcoin Investment Trust, offering further evidence of institutional adoption of digital assets.
As first reported by MacroScope, a Twitter feed devoted to institutional trading and asset management, the firms disclosed their GBTC holdings in new filings for the period ending June 30, 2021.
Clear Perspective Advisors, an Illinois-based wealth manager, revealed direct ownership of 7,790 GBTC shares on Friday.
Ohio-based Ancora Advisors scooped up 13,945 shares of GBTC as of June 30. While that’s a small position for the multi-billion-dollar asset manager, it reflects an important strategic move given that the company has a long-term investment perspective.
Meanwhile, two additional firms added to their GBTC holdings for the June 30 reporting period. Boston Private Wealth, which had previously reported 88,189 GBTC shares as of March 31, increased its exposure to 103,469 shares. Ohio-based manager Parkwood boosteits holdings to 125,000 shares from 93,000 at the end of March.
Major firms are finding new and diverse ways for gaining exposure to Bitcoin and other virtual assets. As Cointelegraph reported, tech giant Intel recently disclosed a sizable position in Coinbase stock, which provides direct exposure to the digital currency market.
Institutions are likely to increase their exposure to digital assets in the coming months — provided that the bullish narrative continues to play out. Many crypto observers subscribe to four-year cycle theory, which attempts to explain and forecast Bitcoin’s price from one cycle low to another. With the crypto asset class returning above $2 trillion this week — representing a $700 billion recovery from the local bottom — it appears that the next phase of the bull cycle is gaining traction.
Sub-zero Interest? GBTC Hits Biggest Discount Since May Bitcoin Price Crash
GBTC will “take time” to restore its balance thanks to changing market forces, analyst Willy Woo says.
Bitcoin (BTC) investment vehicle the Grayscale Bitcoin Trust (GBTC) is trading at its biggest discount since the May BTC price crash.
Data on Thursday confirms that as BTC/USD trades near $44,000, GBTC shares are over 16.5% below the spot price.
Analyst: Grayscale comeback “will take time”
Grayscale, which has $42 billion in assets under management across its various cryptocurrency funds, has seen institutional interest endure throughout the recent Bitcoin price dip.
Despite some conspicuous buy-ins, however, progress has been slow throughout the period of volatile activity, which saw Bitcoin dip from $64,500 to just $29,000.
While the spot price has recovered, GBTC interest has lagged, producing a major discount to net asset value (NAV), which has increased, not decreased, with Bitcoin’s recent gains.
This week, the discount even passed its lowest point from July, meaning that it is now at its deepest since the start of May’s price rout.
In comments on the fund’s performance, statistician Willy Woo highlighted its management fee in addition to previous trading conditions.
“GBTC reversed due to 2% fee on 600k+ BTC. But it was oversupplied by the frothy arb trade before the dip,” he responded to popular commentator BTC Archive during a Twitter debate.
“It will take time for it to find its proper balance again, given they cannot reduce inventory. Corporates bought the dip too, see Microstrategy.”
Meanwhile, GBTC unlocking events, long feared to be a negative market influence, are set to come to an end this month, with the vast majority already complete without any noticeable market impact.
Echoes of Q4 2020
That arbitrage trade was a heavy market driver in late 2020 and early 2021, the period in which the most recent Bitcoin bull run really got started, on-chain analytics firm Glassnode noted last week.
This was in relation to outflows from exchanges, which are now at similar levels to that same period, pointing to “heavy accumulation” among hodlers in anticipation of further BTC price rises.
Grayscale Bitcoin Trust FUD Is Now Over As The Last GBTC Unlock Totals Just 58 BTC
What was once a major bearish narrative exits via the tradesman’s entrance after failing to have any impact on Bitcoin markets.
Bitcoin (BTC) investment vehicle the Grayscale Bitcoin Trust (GBTC) completed its share unlockings this week, ending a major talking point both inside and outside crypto.
Data from monitoring resource Bybt confirms that as of Thursday, no more unlockings are scheduled.
Bitcoin Shrugs Off Another FUD Narrative
Unlocking events at GBTC have continued throughout 2021 and, at one point, formed the focal point for bearish BTC price predictions.
With the equivalent of tens of thousands of BTC released at a time, some feared that selling pressure would explode, sending sentiment tumbling.
This never occurred, and as Cointelegraph reported, there was little logic in the fear from the outset, as Grayscale itself does not allow clients to cash in shares for Bitcoin.
Wednesday, the final unlocking date, involved the equivalent of just 58 BTC. The largest single date, July 18, by contrast, involved 16,240 BTC.
As such, the bearish narrative around Grayscale died out with a whimper rather than a bang. The next series of unlockings is not scheduled until 2022.
“Remember when all the traditional analysts said the Grayscale unlock would unleash billions in selling this last week? Yeah, no,” statistician Willy Woo said last month when it was already clear that the market was not being moved by the events.
Morgan Stanley Bets Big On GBTC
The culmination comes as data reveals that traditional banking giant Morgan Stanley has joined those with a considerable GBTC investment.
In filings with the United States Securities and Exchange Commission this week, the bank reported over 928,000 GBTC shares were owned by its Insight Fund alone.
It joins fellow bank JPMorgan Chase, along with the famously pro-Bitcoin Ark Invest, as recent buyers. GBTC continues to trade at a discount to Bitcoin’s spot price, with its shares 13.3% cheaper as of Thursday.
US Global Investors Bought Crypto Exposure Through Grayscale Funds
The investment firm already has significant exposure to gold, minerals, precious metals, petroleum and other natural resources.
Texas-based investment manager U.S. Global Investors, which reported $4.6 billion in assets under management as of Q1 2021, has bought exposure to Bitcoin.
According to a Monday filing from the United States Securities and Exchange Commission, U.S. Global Investors added more than $566,389 worth of shares of Grayscale Bitcoin Trust, or GBTC, to three of its eight mutual funds as of June 30. The filings show the company invested $302,899 GBTC in its Gold and Precious Metals Fund, $222,532 in its World Precious Minerals Fund, and $40,958 in its Global Resources Fund.
The Bitcoin (BTC) exposure represents up to 0.19% of the net assets in the funds, given the Gold and Precious Metals Fund alone has roughly $158 million in assets under management. However, it is a seemingly surprising investment from a firm that has significant exposure to gold, minerals, precious metals, petroleum and other natural resources. U.S. Global Investors also classified GBTC as common equity.
“This is not a surprise nor does it indicate a shift in the way other gold equity managers view crypto or Bitcoin,” said gold bug Peter Schiff. Schiff further noted that the CEO of U.S. Global Investors, Frank Holmes, is also the executive chair of crypto mining firm Hive Blockchain.
A gold bug like Schiff, Holmes had previously predicted that the prices of Bitcoin and Ether (ETH) could reach $80,000 and $3,000, respectively, in 2021. Though Bitcoin’s all-time high price stalled at $64,899 in April, the price of ETH went well above the CEO’s prediction, reaching an all-time high of $4,384 in May.
For whatever reason — hedging bets on inflation, responding to investor interest — other major investment firms have purchased GBTC. Morgan Stanley’s Insight Fund owns roughly 928,000 shares of Grayscale’s Bitcoin Trust, and SEC filings show Edge Wealth Management, JPMorgan Chase, Ark Invest, and Rothschild Investment Corporation also have exposure to BTC through Grayscale.
DCG, Facing Competition From Bitcoin ETFs, Plans To Buy More Grayscale Bitcoin Trust
The crypto conglomerate says it may buy up to $1 billion of subsidiary Grayscale’s flagship product.
Digital Currency Group (CoinDesk’s parent company) is planning to hoover up to a billion dollars worth of Grayscale Bitcoin Trust (GBTC).
* With subsidiary Grayscale’s flagship product facing sudden competition for brokerage accounts’ bitcoin dollars, the crypto conglomerate increased its GBTC buy range by $250 million, DCG announced Wednesday. It said it has bought $388 million shares of GBTC so far.
* The authorization comes as bitcoin-curious mainstream investors look beyond Grayscale for crypto exposure. On Tuesday, ProShares, a Wall Street fund shop, launched the first bitcoin futures-linked exchange-traded fund (ETF) in the U.S. The ETF (NYSE: BITO) closed the day with $570 million in assets.
* GBTC, meanwhile, ended Tuesday at a 16.55% discount relative to the price of bitcoin after that figure hit a five-month low of 20.5% on Monday. The trust has its own plans to become an ETF, a conversion unlikely to happen any time soon.
Biggest Bitcoin Fund Sells At Biggest Discount Ever
* Price Of GBTC Shares Is Over 21% Value Of Its Underlying Coins
* Grayscale Filed To Convert GBTC Into Etf; SEC Hasn’t Approved
A month-long selloff in cryptocurrencies has been especially painful for holders of the Grayscale Bitcoin Trust.
While Bitcoin has sank nearly 32% since November’s record high, the $30 billion fund (ticker GBTC) has lost nearly 37% over that span. That’s widened the difference between GBTC’s share prices and the underlying value of its Bitcoin holdings to negative 21% as of Friday’s closing prices, according to data compiled by Bloomberg.
The discounts boils down to the structure of the trust. Unlike most traditional exchange-traded funds, GBTC doesn’t allow for redemptions — meaning that shares can’t be created and destroyed to calibrate the supply of shares with demand. Instead, trust shareholders must find buyers in the secondary market, which can intensify the discount when the price of Bitcoin falls.
Grayscale Investment LLC’s parent company, Digital Currency Group, has sought to repair the discount by buying back GBTC shares. Grayscale also filed to convert GBTC — the world’s biggest Bitcoin fund — into an exchange-traded fund in October, though the U.S. Securities and Exchange Commission has only allowed derivatives-based products to launch.
Grayscale has stepped up its campaign in the months amid little indication that the SEC’s stance has changed. The asset manager sent a letter to regulators urging them to approve GBTC’s conversion last month. Coinbase Global Inc., which serves as custodian of the fund, followed last week with a similar letter on Grayscale’s behalf.
“There was a letter submitted on our behalf in filings for the ETF that called out the fact that the SEC should really maintain an even playing field,” Grayscale Chief Executive Officer Michael Sonnenshein said on Bloomberg Radio.
“These two products are going to be tied to that same underlying Bitcoin market, which is where the SEC has really historically had their issues.”
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As Deutsche Bank Axes 18K Jobs, Bitcoin Offers A ‘Plan ฿”: VanEck Exec (#GotBitcoin?)
Argentina Drives Global LocalBitcoins Volume To Highest Since November (#GotBitcoin?)
‘I Would Buy’ Bitcoin If Growth Continues — Investment Legend Mobius (#GotBitcoin?)
Lawmakers Push For New Bitcoin Rules (#GotBitcoin?)
Facebook’s Libra Is Bad For African Americans (#GotBitcoin?)
Crypto Firm Charity Announces Alliance To Support Feminine Health (#GotBitcoin?)
Canadian Startup Wants To Upgrade Millions Of ATMs To Sell Bitcoin (#GotBitcoin?)
Trump Says US ‘Should Match’ China’s Money Printing Game (#GotBitcoin?)
Casa Launches Lightning Node Mobile App For Bitcoin Newbies (#GotBitcoin?)
Bitcoin Rally Fuels Market In Crypto Derivatives (#GotBitcoin?)
World’s First Zero-Fiat ‘Bitcoin Bond’ Now Available On Bloomberg Terminal (#GotBitcoin?)
Buying Bitcoin Has Been Profitable 98.2% Of The Days Since Creation (#GotBitcoin?)
Another Crypto Exchange Receives License For Crypto Futures
From ‘Ponzi’ To ‘We’re Working On It’ — BIS Chief Reverses Stance On Crypto (#GotBitcoin?)
These Are The Cities Googling ‘Bitcoin’ As Interest Hits 17-Month High (#GotBitcoin?)
Venezuelan Explains How Bitcoin Saves His Family (#GotBitcoin?)
Quantum Computing Vs. Blockchain: Impact On Cryptography
This Fund Is Riding Bitcoin To Top (#GotBitcoin?)
Bitcoin’s Surge Leaves Smaller Digital Currencies In The Dust (#GotBitcoin?)
Bitcoin Exchange Hits $1 Trillion In Trading Volume (#GotBitcoin?)
Bitcoin Breaks $200 Billion Market Cap For The First Time In 17 Months (#GotBitcoin?)
You Can Now Make State Tax Payments In Bitcoin (#GotBitcoin?)
Religious Organizations Make Ideal Places To Mine Bitcoin (#GotBitcoin?)
Goldman Sacs And JP Morgan Chase Finally Concede To Crypto-Currencies (#GotBitcoin?)
Bitcoin Heading For Fifth Month Of Gains Despite Price Correction (#GotBitcoin?)
Breez Reveals Lightning-Powered Bitcoin Payments App For IPhone (#GotBitcoin?)
Big Four Auditing Firm PwC Releases Cryptocurrency Auditing Software (#GotBitcoin?)
Amazon-Owned Twitch Quietly Brings Back Bitcoin Payments (#GotBitcoin?)
JPMorgan Will Pilot ‘JPM Coin’ Stablecoin By End Of 2019: Report (#GotBitcoin?)
Is There A Big Short In Bitcoin? (#GotBitcoin?)
Coinbase Hit With Outage As Bitcoin Price Drops $1.8K In 15 Minutes
Samourai Wallet Releases Privacy-Enhancing CoinJoin Feature (#GotBitcoin?)
There Are Now More Than 5,000 Bitcoin ATMs Around The World (#GotBitcoin?)
You Can Now Get Bitcoin Rewards When Booking At Hotels.Com (#GotBitcoin?)
North America’s Largest Solar Bitcoin Mining Farm Coming To California (#GotBitcoin?)
Bitcoin On Track For Best Second Quarter Price Gain On Record (#GotBitcoin?)
Bitcoin Hash Rate Climbs To New Record High Boosting Network Security (#GotBitcoin?)
Bitcoin Exceeds 1Million Active Addresses While Coinbase Custodies $1.3B In Assets
Why Bitcoin’s Price Suddenly Surged Back $5K (#GotBitcoin?)
Zebpay Becomes First Exchange To Add Lightning Payments For All Users (#GotBitcoin?)
Coinbase’s New Customer Incentive: Interest Payments, With A Crypto Twist (#GotBitcoin?)
The Best Bitcoin Debit (Cashback) Cards Of 2019 (#GotBitcoin?)
Real Estate Brokerages Now Accepting Bitcoin (#GotBitcoin?)
Ernst & Young Introduces Tax Tool For Reporting Cryptocurrencies (#GotBitcoin?)
Recession Is Looming, or Not. Here’s How To Know (#GotBitcoin?)
How Will Bitcoin Behave During A Recession? (#GotBitcoin?)
Many U.S. Financial Officers Think a Recession Will Hit Next Year (#GotBitcoin?)
Definite Signs of An Imminent Recession (#GotBitcoin?)
What A Recession Could Mean for Women’s Unemployment (#GotBitcoin?)
Investors Run Out of Options As Bitcoin, Stocks, Bonds, Oil Cave To Recession Fears (#GotBitcoin?)
Goldman Is Looking To Reduce “Marcus” Lending Goal On Credit (Recession) Caution (#GotBitcoin?)
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