Digital asset manager Grayscale Investments is not a typical cryptocurrency company. This regulated company has attracted a lot of institutional money. In the last week alone, the company’s Bitcoin holdings increased by about 56,000. Grayscale Bitcoin The Grayscale Bitcoin Trust currently manages a total of $11.1 billion in Bitcoin, which represents 2.7% of the total Bitcoin supply.
Barry Silbert, CEO of Grayscale Digital Currency Group (Digital Currency Group), has called Grayscale "the fastest growing asset manager ever" due to the influx of bitcoins into the company from new and old investors.
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About Grayscale Bitcoin Trust
Why did Grayscale gobble up so many bitcoins?
Institutional money is flowing into GBTC as it is currently one of the only publicly traded Bitcoin instruments in the US. Nick Cote, a market analyst at crypto trading platform Hrxo Labs, explained in a declassified note: “Certain institutional investors still have concerns about investing directly in cryptocurrencies, so Grayscale provides a regulatory proxy that gives them indirect access to the asset class. exposure without the risk of self-custody."
The product is strictly regulated and registered with the US Securities and Exchange Commission, and can even be used as part of a US Individual Retirement Account (IRA). These features allow institutional investors, IRAs, and family offices to gain exposure to bitcoin price movements in a delegated manner and use it as an inflation hedge, eliminating the need to use unregulated cryptocurrency exchanges or custodians. Disadvantages of dealing with people.
Investor demand for GBTC has emerged as institutional interest in Bitcoin exposure has reached unprecedented levels. Earlier this year, fund manager Paul Tudor Jones invested more than $70 million in bitcoin futures, while British macro fund Ruffer also announced a $750 million bitcoin allocation strategy this week.
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Grayscale's premium attracts liquidity
GBTC is trading at a 25% premium to the spot price of Bitcoin, presenting an opportunity for "arbitrage" trading. The premium itself became a game for speculators, ultimately increasing the liquidity of GBTC in the process.
The basic trading method is: investors can either short (bet on a lower price) freely trade high-priced premium GBTC stocks, or go long (buy) GBTC stocks (locked for 6 months). As the price of Bitcoin (and GBTC) rose, short positions were balanced against long positions, and investors ended up with a 25% premium.
Harris Kupperman said: "Bitcoin keeps getting into GBTC because these stocks are trading above net asset value, which incentivizes (arbitrageurs) to buy GBTC at net asset value on a daily basis and then find hedging exposure. This product is appealing to a different class of bitcoin buyers.”
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What is the future of GBTC?
The stocks themselves could also see massive sell-offs if Bitcoin adjusts to a lower price or the lock-up period ends. The last time this happened was at the end of 2017, when the infamous Bitcoin bubble burst and GBTC fell from $38 to $9 in a month, before falling below record lows in the months since.
This article only represents the personal views of encrypted notebooks and does not constitute any investment opinions or suggestions.
This article only represents the personal views of encrypted notebooks and does not constitute any investment opinions or suggestions.
