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Grayscale Bitcoin Trust Discount Hits Record Low
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Crypto Giant Grayscale Now Manages Nearly $60,000,000,000 in Total Assets
Crypto titan Grayscale Investments has nearly $60 billion in total assets under management (AUM) after declining crypto market prices pushed their total down to $58.2 billion as of Friday afternoon.
Grayscale’s assets under management include more than $41.3 billion in the Grayscale Bitcoin Trust and more than $14.5 billion in the company’s Ethereum (ETH) Trust.
11/12/21 UPDATE: Net Assets Under Management, Holdings per Share, and Market Price per Share for our Investment Products.
Total AUM: $58.2 billion$BTC $BAT $BCH $LINK $MANA $ETH $ETC $FIL $ZEN $LTC $LPT $XLM $ZEC $UNI $AAVE $COMP $CRV $MKR $SUSHI $SNX $YFI $UMA $BNT $ADA $SOL pic.twitter.com/gMTlowKZA4
— Grayscale (@Grayscale) November 12, 2021
Earlier this week, Grayscale briefly surged past SPDR Gold Trust (GLD), the world’s largest gold fund, in terms of AUM. SPDR Gold Shares managed about $58.31 billion in assets as of November 10th, according to YCharts.
Grayscale chief executive Michael Sonnenshein notes on Twitter that the Grayscale Bitcoin Trust (GBTC) also had $473.7 million in notional daily volume this week, more than ProShares Bitcoin Futures exchange-traded fund (ETF), which goes by the ticker BITO.
…and $GBTC did $473.7m in notional volume
— Michael Sonnenshein (@Sonnenshein) November 10, 2021
Last month, Grayscale announced plans to convert GBTC into an ETF. Unlike ProShares’ Bitcoin Futures product, Grayscale filed with the U.S. Securities Exchange Commission (SEC) for a Bitcoin spot ETF, which would track the crypto asset’s current price.
Grayscale initially applied to convert GBTC into an ETF in 2016 before withdrawing the application months later over concerns that the regulatory environment was not ready for such a product.
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Grayscale parent company expands GBTC purchase allocation to $1 billion
According to an announcement issued on Wednesday, DCG is now authorized to buy up to $1 billion worth of Grayscale Bitcoin Trust (GBTC).
This development extends DCG’s prior authorization by $250 million if they choose to do so. Indeed, DCG has so far purchased $338 million in GBTC, according to the company’s announcement on Wednesday.
As previously reported by Cointelegraph, DCG had purchased $193.5 million worth of GBTC shares back in May 2021. At the time, the firm’s GBTC purchase limit stood at $250 million.
As part of the announcement, DCG revealed that it plans to use cash on hand to facilitate the purchase on the open market under the provisions enshrined in Rule 10b-8 of the Exchange Act.
DCG’s announcement comes on the heels of plans by Grayscale to convert its GBTC product to a Bitcoin (BTC) exchange-traded fund (ETF).
However, such plans depend on the United States Securities and Exchange Commission (SEC) softening its stance on Bitcoin ETFs.
Related: Grayscale confirms Bitcoin ETF plans and adds exposure to Zcash, Stellar Lumens and Horizen to its trusts
SEC chairman Gary Gensler has already spoken in favor of BTC-related ETFs backed by Bitcoin futures rather than those based on the spot price of the cryptocurrency.
Gensler’s comments were part of SEC chairman’s remarks on issues raised about the ProShares’ Bitcoin Strategy ETF that made history on Tuesday as the first BTC-related ETF to launch in the U.S. market.
Apart from its future Bitcoin ETF plans, Grayscale has also added more cryptocurrencies to its catalog of investment products.
Earlier in October, Zcash (ZEC), Stellar Lumens (XM), and Horizen (ZEN) became the latest additions to the firm’s suite of altcoin trusts.
Grayscale Investment’s parent company — Digital Currency Group (DCG) — has extended its purchase allocation for the former’s Bitcoin Trust product.
Will The SEC Approve A Bitcoin Futures ETF In 2021? Here Are The Implications
Rumors are flying. The SEC could approve a Bitcoin Futures ETF before the year ends. What does this mean? And why a Bitcoin Futures ETF before one for the asset itself? That’s what we’re here to explore. It seems like the US Security And Exchange Commission will not give the go-ahead to the mythical Bitcoin ETF just yet… or ever, but a new option has a few companies salivating.
Related Reading | Skybridge Capital Applies For Cryptocurrency ETF And Accumulates $100 Million For ALGO Fund
But first, why is the SEC hesitant about approving the Bitcoin ETF? Investopedia responds:
“The reason is that bitcoin, the largest cryptocurrency in the world by market capitalization, remains largely unregulated. Additionally, the Securities and Exchange Commission (SEC) is hesitant to allow an ETF focused on the new and largely untested cryptocurrency market to make its way to the public.”
If that’s true, what makes us think that a Bitcoin Futures ETF is not only possible, but imminent? Well, last month The SEC Chairman Gary Gensler told the Aspen Security Forum:
“I anticipate that there will be filings with regard to exchange-traded funds (ETFs) under the Investment Company Act (’40 Act). When combined with the other federal securities laws, the ’40 Act provides significant investor protections.
Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded Bitcoin futures.”
🤯 pic.twitter.com/XUlSV31jEw
— Eduardo Prospero (@edprospero23) September 23, 2021
Is A Bitcoin Futures ETF What US Investors Want?
Since Gary Gensler sent such a clear signal, the financial world responded in unison.
“At least four asset managers have filed for ETFs that invest in bitcoin futures after Securities and Exchange Commission chair Gary Gensler earlier this month indicated that he could approve such funds. But investors may not want them in lieu of physically backed bitcoin ETFs, analysts have said.”
Who’s interested in ETFs, though? Well, according to Investopedia, “A bitcoin ETF mimics the price of the digital currency, allowing investors to buy into the ETF without trading bitcoin itself.” Some investors or groups simply can’t invest in bitcoin, the asset, because their own internal rules won’t allow them to. They can’t purchase bitcoin through a brokerage account. No financial institution backs it, so no one protects them. And, of course, there’s the feared volatility.
Bloomberg explains how Bitcoin fixes this:
“A Bitcoin ETF could help get around those restrictions since the format is more widely accepted. “There are all sorts of custody and regulatory hurdles for big financial institutions to jump through,” said Ross Mayfield, investment strategy analyst at Robert W. Baird & Co. “If it were offered in an ETF, it clears a lot of that up for financial institutions.”
However, it appears that the SEC won’t approve one any time soon. Why would they approve a Bitcoin Futures ETF instead? Bloomberg continues:
“For the SEC’s purposes, Bitcoin futures also offer an additional level of security because they are governed by the Chicago Mercantile Exchange and require investors to put down cash on margin to trade, as a form of collateral.”
BTC price chart 09/27/2021 on Coinbase | Source: BTC/USD on TradingView.com
Experts And Important Players Disagree
While some companies can’t wait for the Bitcoin Futures ETF to be available, others are less enthusiastic. One of those is Michael Sonnenshein, CEO of Grayscale Investments. His company is one of the many that applied for a Bitcoin ETF and are still waiting for approval. In a recent CNBC interview, he said:
“It would be shortsighted of the SEC to allow a futures-based product into the market before a spot product,” Sonnenshein told CNBC’s “Squawk Box” on Tuesday. “They really should be allowing both products into the market at the same time and let investors choose which way they want.”
Related Reading | Did The SEC’s Gary Gensler Threaten Crypto And DeFi In The WaPo Interview?
Of course, he’s heavily invested in this outcome. His company’s Grayscale Bitcoin Trust is incredibly successful, but if they manage to turn it into an ETF the scale might go parabolic. However, he’s not the only one that thinks that way. In the Bloomberg article, another expert elaborated on the Bitcoin Futures ETF ‘s limitations:
“With futures-based products, you introduced additional cost, more complexity, you have futures contracts that have to be rolled,” said the ETF store’s Geraci. “It’s just a sub-optimal option for investors.”
In any case, the Bitcoin Futures ETF approval is just speculation. Gary Gensler said he looked forward to reading his staff’s review of the fillings, which is not a guarantee by any stretch of the imagination.
Featured Image by Markus Winkler from Pixabay - Charts by TradingView
Robo-Advisor Wealthfront Adds Bitcoin Exposure Offering
Robo-advisor giant Wealthfront will now let its 400,000 clients invest up to 10% of their portfolios in bitcoin through GBTC.
Robo-advisor giant Wealthfront has announced it will provide its nearly 400,000 clients with the option to get bitcoin exposure through Grayscale Bitcoin Trust (GBTC).
The firm, which provides a hands-free approach to investing and has $25 billion of assets under management (AUM), announced the new addition to its offerings on July 29. But clients will be limited to allocating up to 10% of their portfolios in bitcoin.
Wealthfront claimed the limit to be a protection because they consider GBTC an investment “riskier and more volatile than most ETFs.” The company also added new ETFs to its menu of investment options, including ARK, cannabis, self-driving cars, and fintech options.
But when it comes to bitcoin, those with brokerage accounts with Wealthfront will be given only one option for BTC exposure – GBTC. Grayscale’s bitcoin trust shares attempt to follow the BTC/USD market price, minus expenses and fees. Naturally, however, the investor won’t possess real bitcoin.
Wealthfront said it chose that investment vehicle because buying bitcoin “can feel intimidating – it takes time and effort to research all of the options, set up a wallet, and monitor an additional account.”
However, buying bitcoin and transferring it to a self-custodial wallet has become hassle-free nowadays. An individual can start small, using an exchange and their mobile phone as a wallet, and build up from there. Eventually, buying KYC-free bitcoin and using privacy-conscious tools will become effortless.
Additionally, going down the Bitcoin rabbit hole will enable the investor to acquire as much bitcoin as they see fit and custody it themselves to become a fully sovereign individual.
Edge Wealth Management Increases Bitcoin Exposure By Over 40%
Edge has disclosed it holds 54,134 shares of Grayscale Bitcoin Trust in a filing with the SEC, a more than 40% increase since last quarter.
Edge Wealth Management has disclosed ownership of 54,134 shares of Grayscale Bitcoin Trust (GBTC) in a 13F-HR form filing with the U.S. Securities and Exchange Commission (SEC), representing a 43.95% increase in the 37,605 shares it held in April.
GBTC has become a popular investment vehicle among institutions for obtaining indirect exposure to bitcoin. The trust, which might turn into an exchange-traded fund (ETF) soon, attempts to track the bitcoin market price, minus fees and expenses.
Edge’s move over the past quarter took place while the Bitcoin price experienced a significant decline, now trading 50% below its previous high in April. This demonstrates a “buy the dip” mentality among institutional investors, who are enjoying lower prices to accumulate more bitcoin – something Grayscale CEO Michael Sonnenshein also recently commented on.
Additionally, comparing Edge’s two most recent quarter filings reveals that the firm liquidated all exposure to ether that it had through Grayscale Ethereum Trust, now a total of zero shares. The company may have realized the uniqueness of bitcoin and enjoyed [indirectly] stacking sats at a discount.
Institutional interest in bitcoin has increased dramatically in 2021, driving an ETF analyst claim that it might end up leading the SEC to hurry and approve a bitcoin exchange-traded fund this year still.
Other institutional investors who have recently bought the dip include Rothschild Investment Corp, which more than tripled its bitcoin exposure over the past quarter, and ARK Invest, which purchased nearly half a million GBTC shares this week for over $10 million.
While directly holding bitcoin doesn’t become a norm for institutions thirsty for BTC exposure, indirect investment vehicles such as GBTC and bitcoin ETFs have absorbed the vast demand. However, as Bitcoin matures, it may become more accessible for institutional investors to grab a piece of the pie and directly hold bitcoin in their balance sheets – something retail is currently more proficient at.
Bitcoin’s key momentum metric hints at bullish divergence as BTC clings to $33K
A recent run-down in the Bitcoin (BTC) market faces the prospects of exhaustion before confirming a full-fledged bearish breakdown, so reflects a classic momentum-based oscillator.
RSI forming higher lows
Dubbed as Relative Strength Index, or RSI, the indicator measures the speed as well as change of directional price movements. It operates within a set range of numbers—between 0 and 100. The close is RSI to 0, the weaker is the price momentum. Conversely, an RSI reading near 100 reflects a period of strong momentum.
The range also helps determine an asset’s buying and selling opportunity. In detail, an RSI reading below 30 means the asset is oversold, thus an attractive buy. Meanwhile, RSI above 70 shows an overbought asset, meaning its holders would eventually sell it to secure profits.
The RSI also enables traders to spot buying/selling opportunities based on divergences between the price and the momentum. For example, when price makes a new low but RSI makes a higher low, then it is considered a buying signal—a bullish divergence. Conversely, a Bearish RSI Divergence appears when price makes a new high but RSI makes a lower high.
So it appears, Bitcoin is confirming a bullish divergence.
Independent market analyst CryptoBirb spotted the price-momentum deviation on Bitcoin’s one-day chart. In there, the pseudonymous entity noted BTC/USD forming a sequence of lower lows around the same period its RSI climbed while forming higher lows.
The statement appeared as the BTC/USD exchange rate corrected lower after forming a local top at $36,675 on June 29. However, as of the Friday London session, the pair was trading below $33,000. The RSI fell in tandem with the latest downside move and was near 42 at press time, a neutral-to-bullish area.
Numerous headwinds for Bitcoin
Downside sentiment in the Bitcoin market persisted due to a flurry of pessimistic events. That included a global crypto crackdown that started with a ban in China in May and spread to the UK, India, South Africa, and the United States.
For instance, the Financial Conduct Authority banned the world’s leading crypto exchange Binance from undertaking regulated activities in the U.K. Additionally, in India, Enforcement Directorate issued a show-cause notice to Binance’s subsidiary exchange, WazirX, for facilitating money laundering.
More headwinds appeared from hints of hawkishness from the Federal Reserve. The U.S. central bank surprised Bitcoin investors with its sudden intention to control inflationary pressures with eventual interest rate hikes in 2023. BTC/USD dropped by more than 28% after the Fed’s big reveal but later recovered after finding credible support near $30,000.
Nonetheless, bulls kept failing at sustaining Bitcoin price uptrends above the $40,000-level. As a result, the cryptocurrency remains stuck inside the $30K-$40K range, showing no clear directional bias in the short term.
Konstantin Anissimov, executive director at CEX.IO, also noted that accredited investors have started maintaining distance from Bitcoin over its concerning environmental impacts. He added that mainstream interest in the cryptocurrency will return once miners switch to alternative sustainable energy options.
“When the environmental concerns are no longer a worry, many institutional investors are likely to trust the digital currency again, and as such buy more,” Anissimov told Cointelegraph, adding:
Bitcoin has a near-term projection of $50,000 and a longer-term projection of $75,000.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Banking Giant Morgan Stanley Purchases 28,289 Shares of Grayscale Bitcoin Trust
According to the U.S. Securities and Exchange Commission document, the US leading investment bank Morgan Stanley is buying 28,289 shares of Grayscale Bitcoin Trust through its European Opportunity Fund.
The document shows that up to 25% of each fund’s portfolio can invest assets in Bitcoin. The European Opportunity Fund includes European companies in technical and non-technical fields and other investments.
The Grayscale Bitcoin Trust is an investment vehicle designed to enable investors to trade Bitcoin shares without actually owning the underlying cryptocurrency, first established in 2013 by Barry Silbert. He also is the founder and CEO of Digital Currency Group (DCG), a Bitcoin and blockchain investment company that has invested in lots of famous companies such as Ripple, Coinbase, Circle, Kraken, and Chainalysis.
Recently, Morgan Stanley remains active in the cryptocurrency market.
According to the coverage from the Blockchain.News on March 21, Morgan Stanley was considering buying a significant share in Bithumb, a major crypto exchange in South Korea.
And on March 18, 2020, Morgan Stanley has made history as the first American bank to offer its clients access to Bitcoin (BTC) fund investments. Morgan Stanley succumbed to the request of its clients by providing the service and provision for those qualified clients to access up to three Bitcoin funds. These funds include two from Galaxy Digital, a crypto firm founded by Mike Novogratz, and one from a joint effort from asset manager FS Investments and bitcoin company NYDIG.
Image source: Shutterstock
Grayscale Bitcoin premium rebounds as BTC price falls below $35K — What does it mean?
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.”
Ark Investment tips $20M into Grayscale Ethereum Trust
Cathie Wood’s Ark Investment has reported holdings of 639,069 shares in Grayscale’s Ethereum Trust for Q1 — currently worth around $20.9 million at today’s prices.
ARK Investment has bought 639,069 shares of the Grayscale Ethereum Trust. pic.twitter.com/ofXD5F7QpA
— Documenting Ethereum (@DocumentEther) May 18, 2021
The news of Ark’s major investment into Ethereum was seen as a bullish sign by Ethereum and DeFi proponents. Mythos Capital founder and Bankless author Ryan Adams emphasized how significant he saw the developments:
“Remember when you told you the institutions would never buy ETH? They keep underestimating this asset. ETH IS MONEY.”
Ether bulls have been growing noticeably more confident recently, with the co-founder of venture capital firm Framework Ventures, Vance Spencer tweeting earlier today:
“There were many times when crypto would not have been strong enough to survive without BTC as the dominant narrative. I no longer believe this is the case. Regime change is coming.”
Cointelegraph reported on May 5 that institutional managers bought $30.2 million worth of Ethereum at the end of April, bringing their total holdings to an all-time high of $13.9 billion.
Despite the excitement around the ETH buy, Ark’s Q1 filing with SEC earlier this month shows the firm’s portfolio still heavily leans in Bitcoin’s favor. Ark reported holdings of 8.6 million shares in Grayscale’s Bitcoin Trust, worth more than $298 million as of today.
Data from TradingView however shows that Grayscale’s ETH Trust has been much more lucrative compared to Grayscale’s Bitcoin trust in 2021.
The share price of Grayscale’s ETH Trust, or ETHE, has increased by 179% this year, up from $11.70 on Jan. 4, to $32.70 as of today. The share price of Grayscale’s BTC Trust, or GBTC, has increased by a mere 1.7% in the same time frame, up from $33.80 on Jan. 4, to around $34.38 today. GBTC has been trading at a 15-20% discount to its Bitcoin holdings.
Cathie Wood and Ark Investments don’t share the same environmental concerns as expressed recently by Elon Musk and Tesla.
In a May 17 newsletter published by the firm, Ark questioned how well Elon Musk had done his research on the topic, noting that “Tesla’s decision seems to have been triggered by private equity firm Greenidge’s plans to revive a coal power plant to mine Bitcoin.”
The firm highlighted that Greenidge had clarified not only that its plant is powered by natural gas and feeds the grid but also that it bought carbon credits to offset the emissions:
“In our view, the concerns around Bitcoin’s energy consumption are misguided. Contrary to consensus thinking, we believe the impact of Bitcoin mining could become a net positive to the environment.”
According to news outlet Bazinga on May 18, Ark also recently added another 259,897 Coinbase shares to its holdings via the Ark Innovation ETF and the ARK Next Generation Internet ETF — worth more than $62 million at today’s price of around $241.