Bitcoin Forum

As per their official tweet,

https://i.imgur.com/nAHG8yd.png

https://twitter.com/Grayscale/status/1291476478358560768

Maybe this is another bullish indicator? And it seems that Grayscale is leading or has become the authority as far as crypto investing and asset management with this numbers.

I don't think this is a bullish indicator.

The more money is locked up in a single place, the greater the centralization risk.

If Greyscale goes under, that would be catastrophic for the industry. I also don't like that Greyscale could easily manipulate the market if they wanted.

I'd rather see a large number of smaller hedge funds maintain an AUM of $5.7 billion total.

Considering how much BTC Grayscale buys, or rather that they have more than doubled that amount in Q2 2020 compared to Q1, we can safely say that this is a bullish sign. The price is not rising just like that, there is a reason for that - and the biggest reason is certainly that Grayscale and Square bought 137.90% of all mined BTC in Q2 (only the ratio is shown in this % - it should not be related to virgin coins).

---

If someone literally buys so many quantities of BTC (currently more than is obtained by mining) it is logical that we have the law of supply and demand in place. Of course, centralization is bad for BTC - but Coinbase owns about 1 million BTCs which are just a risk - and on the other hand Grayscale allows large investors to enter BTC without too much trouble.

What will happen when the first BTC ETF is approved? Then we will not talk about billions, but about trillions (thousands of billions) that will go in the direction of Bitcoin.

Good thread about Grayscale by fillippone - > Everything you wanted to know about Grayscale BTC Trust but were afraid to ask! (https://bitcointalk.org/index.php?topic=5256529.0)

Exactly. While it might not be good news in an ideological perspective, it's technically a bullish indicator. Economic models don't care about fundamentals.

And for the centralization argument, yes, I don't like centralization as much as you do, but let's look at the bigger picture and not forget that there are boomers out there that want to take advantage of bitcoin's economic model, but they don't even know how to use a computer(hence likely for them to not know how to secure their funds themselves).

Just asking to the community as I am not able to find the relevant information.

I am not sure if Greyscale deals into physical bitcoin. Their funds are just linked to the price of its underlying assets. Am I correct?

If the above is true, then all these figures don't make any sense because these are not flowing into the market. Not really helping in increasing market liquidity.

Can someone shed more light on it? I may be wrong!

Didn't dig much into it, but the way I understand it, Grayscale does actually buy and hold bitcoin(they've been buying a crap ton of mined bitcoin in the past few months), but people don't buy actual bitcoin through their bitcoin trust(GBTC).

https://i.imgur.com/GmuA492.png

While anyone who understands the idea behind the whole Bitcoin story knows that it would be ideal to throw banks and companies like Grayscale out of the equation, it's simply not possible because Bitcoin is meant to be available to everyone - and therefore anyone can buy it - as you say, there are people who have a lot of money, but technically they are not up to the challenges of modern times.

I think Grayscale shows how much impact only one or two companies can have if they have serious intentions when it comes to investing in Bitcoin. Like it or not, the fact is that the big players are the ones who will dictate the price of BTC.

---

The link I posted in my post gives a very nice insight about Grayscale, I suggest you read it ;)

That would only be a bearish factor if they went under. The centralization risk itself doesn't have a bearish effect on prices.

As I've said before, part of this (possibly even most) is arbitrage pressure. The premium over spot is only half what it used to be, so somebody has been buying their private placements while selling on the open market.

Still, Grayscale is obviously buying a notable amount of BTC. We probably shouldn't ignore the underlying demand that could signify, my theory about arbitrage aside.


Grayscale buys BTC, then they issue GBTC shares against them, which they sell to investors at NAV. But those investors can't sell for a year. That's why there is a big disparity between GBTC and spot prices.

It was a year lockup period but this has changed to six months since January when the Bitcoin Trust became a fund reporting to the SEC allowing better terms for institutions and accredited investors (source (https://cointelegraph.com/news/now-reporting-to-the-sec-grayscale-bitcoin-trust-one-step-closer-to-public-trading)).

Grayscale has also applied its Ethereum Trust to become a SEC reporting company a few days ago (source (https://cointelegraph.com/news/grayscale-ethereum-trust-files-to-become-an-sec-reporting-company)).

These products are traded in OTCQX (https://www.investopedia.com/terms/o/otcqx.asp). The Grayscale Trusts provide Bitcoin and a few more alts as exposure to most institutions which otherwise wouldn't be able to access these markets, and take an extra fee for this (~2%).

One thing that I notice though, and I don't know if this is correct or not is that they are buying bitcoin but selling it at a premium price? Please correct me if I'm wrong with my interpretation here. And I was also under the impression that it is going to be lock for 1 year but as @Bitcoin_bullish mentioned, this has change to 6 months.

Grayscale sells its trust shares with premium through a private placement. The premium used to be more than 30% for Bitcoin and for Ethereum it was over 1000% at some point. I don't know how they calculate it but probably it goes higher according to demand.

Investors can sell at the OTC market after the time lock and from what I read they also sell with a premium.

Thanks for the explanation, so it is true that they really sold it a premium, although this could look very shady for the majority and can argue that they can just buy and hold it for themselves instead of going to Grayscale buy crypto's and hold it for them. And so that's how they profited from investors. But the investors can also get profit thru OTC selling with a premium as well.

As much as we don't like the idea of companies like Grayscale accumulating bitcoin for their clients, I think in the long run it can bring investors who has a deep pocket into bitcoin market, hence this could be very serious and could be good in the long run and could be viewed as a bullish indicator, what angle you look at it.

We always shout that we need more money to flow into the the market to keep the price going and preaching that it could get into another all time high such as $50k or even more. And for me this is one factors that it can be realised when bigger hedge fund companies are entering the picture at the right time. I'm not really sure if they could manipulate the price, but the bigger the market becomes, the harder for one or two companies to do some kind of manipulation.

Grayscale places shares at net asset value. Investors don't pay a premium. That's part of the incentive to buy and hold through the lock-up period: buy at spot price, sell at a premium.


https://grayscale.co/investors/

The premium only exists on the OTC market.

I thought that Grayscale sells the stocks at market valuation according to what I've read in the past (nothing official though) but this information I provided was not valid.

While current GBTC stock price is $13,06 and this stock holds $11,17 in Bitcoin and the rest $1,89 is the market premium it seems that according to this  (https://cointelegraph.com/news/how-grayscale-investments-sells-bitcoin-to-financial-advisors)article, Grayscale's Managing Director Michael Sonnenshein "explained that accredited investors can purchase newly issued shares of GBTC directly from Grayscale at the net asset value".

@exstasie is correct and I am sorry about this mistake. I should have done more research on this.

It will be interesting as to who's who behind, there are at least 20 institutional investors:
Never heard any one them, Kinetics ARKW Investments is leading the way.


https://fintel.io/so/us/gbtc


https://i.imgur.com/5iMIw5h.png

The level of institutional interest this time around suggests we may see a huge retail boom along with this rise.

@Bitcoin_bullish, @exstasie  - thank you guys for updating this thread, I'm sure a lot of will learn from it.

@polarityexchange - Yes, because there's a lot of money to be made here. I'm sure they have seen what had happened in 2017 and they wanted to get into the action this time. And with the Defi also to push the crypto market, indeed this is bullish signal.

1.If Greyscale goes bankrupt,there will be some short term negative impact over the cryptocurrency prices,but I'm pretty sure that the crypto prices will recover very fast.
Talking about "catastrophic" consequences is quite a big exaggeration.
2.I think that a 5.7 billion USD cryptocurrency portfolio isn't enough to manipulate the crypto markets.
Grayscale seems like a pretty transparent company to me.The real market manipulators are "hiding in the dark". ;D
3.Smaller hedge funds contain a bigger risk of going bankrupt or turning into exit scams.
I'm not the biggest Grayscale fan,but I can't agree with your opinions.

On contrary if grayscale just goes belly up that means more bitcoin gone and it is not in the market anymore, which means bitcoin is even more scarce and that could result with price going up.

The more money is taken out of the sellers hands the better, we need bitcoin to be as little as possible in amounts, that is why it wouldn't have a bad effect at all. Could it be short term negative because grayscale went down and there would be reaction to it?

Well, maybe if people do not see the bigger picture, but that is only the case if people do not see the bigger picture there.

However long term is 100% guaranteed that it would be better for bitcoin for sure, I would definitely be happy about it because I want bitcoin off the market not go into the market for sellers to drop the price.

Thanks for the information! In that case, it works like an ETF (Exchange traded fund) where the custodian buys bitcoin from the market and sells to the market in form of shares based on the value of the underlying asset. Even though the bitcoins are getting centralized and getting locked under a single location, but it still provides liquidity to the market. So the market is getting benefited by the actions of Greyscale. So if their numbers are increasing, it is safe to assume that the value of their holding is also increase - so there's correlation!

I remember, back in 2017 everyone went crazy when CME first announced their bitcoin ETF. But later we found that CME doesn't deal in actual bitcoins but just plays based on its market price. But since greyscale is actually buying bitcoins from the market - may be considered as a bullish signal.

Overall yes, but it's important to note that GBTC's premium over spot has dropped in half since February, from 30% to 15%. All the increased accumulation by Grayscale has occurred since then too. That tells me some institutions are accumulating GBTC in private placement, while also selling GBTC shares on the open market, and pocketing the difference. That's the only thing that would account for both the increasing assets under management and the significant drop in premium.

So it's not all bullish. A lot of it is just some large players arbitraging the market.