Millennium Management Hedge Fund Gains Exposure to Bitcoin through Grayscale

Millennium Management, a hedge fund with a diverse portfolio and about $48.3 billion assets under management (AUM), has reportedly gained exposure to Bitcoin (BTC) through Grayscale Bitcoin Trust (GBTC).

According to The Street, who cited two people familiar with the matter, Millennium Management threw its weight on the GBTC with dabbles on arbitrage trading and the firm’s direct exposure to Grayscale has been seen as bullish for the industry.

Institutional buy-up of Bitcoin is on the rise as more prominent names are decisively taking a position with different digital assets. Grayscale has particularly increased the number of cryptocurrencies it supports to include Chainlink (LINK) and Filecoin (FIL) in a bid to satisfy institutional demand.

The number of Bitcoin positions Millennium has with Grayscale is undefined as neither company’s executives agreed to make comments about the deal. However, as one of the largest hedge funds around today, the exposure of Millennium Management to Bitcoin reaffirms the growing institutional interest as cryptocurrency journeys into mainstream adoption.

SEC ETF Approval in View?

The embrace of digital assets by publicly listed corporations and hedge funds brings to the fore the need for a Bitcoin Exchange Traded Fund (ETF) product in American markets. While these product types have been approved by authorities in Canada, Switzerland, and other less conservative markets, the United States Securities and Exchange Commission (SEC) is under more intense pressure to let the products come alive in the US.

Grayscale revealed recently the intentions to convert its Grayscale Bitcoin Trust product into an ETF, a move that will shift focus to broader participation and more direct exposure to the emerging asset class by its clients. Other multinational financial institutions including Fidelity, Morgan Stanley and Goldman Sachs are also in the race to introduce a Bitcoin ETF to meet institutional demands. The free flow of money into crypto assets is changing the entire financial world as the global cryptocurrency market capitalization topped $2 trillion in the past week.

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Report: $48 Billion Hedge Fund Millennium Management Had GBTC Exposure

Millennium Management, one of the world’s largest hedge funds with $48 billion in assets under management, is reported to have had exposure to Grayscale Bitcoin Trust (GBTC) as net asset value (NAV) fell steeply in March, according to TheStreet Crypto.

Shares of GBTC have spent a majority of the last six weeks trading negative to NAV, presenting a challenge to investors and funds that implemented the infamous arbitrage trade.

It is notable that GBTC is still trading at a steep discount to NAV, despite attempts from Grayscale to get the shares back to trading at a premium. Because GBTC is structured as a trust, investors who redeemed shares from Grayscale have to abide by a six-month lockup period before being able to trade their shares on the secondary market, potentially locking Millennium and other funds into losses as the premium turned negative in February. 

Year-to-date discount/premium to NAV for GBTC. Source.

Year-to-date discount/premium to NAV for GBTC. Source.

“The arbitrage trade is just so broken,” a source of the Millennium news told TheStreet.

While a Millennium spokesperson declined to comment about its exposure to GBTC, per TheStreet, it is significant that such a large firm reportedly had and potentially still has exposure to the bitcoin market. And it is a positive sign for the asset as it continues to become legitimized in the eyes of Wall Street institutions and investors.

With multiple bitcoin exchange-traded funds (ETFs) pending approval from the U.S. Securities and Exchange Commission, it’s safe to expect an increasing number of hedge funds and institutional investors to add bitcoin exposure over the course of 2021 and beyond. 


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