Everything you wanted to know about Grayscale BTC Trust but were afraid to ask!

[hatshepsut93]

As far as I know, Grayscale is by far the biggest player in the BTC ecosystem. As per the attached spreadsheet they now control more than 2% of the entire BCT supply. Square is getting bigger, and other competitors just started taking steps in this direction, given the huge amount of money to be made. Yet, the pressure is not against the newly mined bitcoin, but against the total supply. So a lot has to be done. But nonetheless, I expect this business growing steadily over the next quarters. Remember that bitcoin is still tiny. The entire market cap of Bitcoin is equal to the market cap that Amazon raised in the month of July only(more or less 220 billions).

Coinbase holds around 1 million coins, that's 4.7% of Bitcoin's supply. And technically, Satoshi also owns 1 million coins, so he's also the biggest player in Bitcoin ecosystem, though he's disqualified cause he's inactive now.

Still, holding 2% of supply is pretty big. I wonder if there's any entity that holds 2% of all gold in the world?

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[slaman29]

I found this a bit late but still very relevant and I wish more of the news items would be focusing on some of these factual items instead of just saying "Grayscale is big and institutional so it's good news for everyone" all the time.

And yes, we can say shit about their marketing all we want but they know how to do it for sure, they're targeting their audience, and it seems about right the way they're doing it.

[fillippone]

As far as I know, Grayscale is by far the biggest player in the BTC ecosystem. As per the attached spreadsheet they now control more than 2% of the entire BCT supply. Square is getting bigger, and other competitors just started taking steps in this direction, given the huge amount of money to be made. Yet, the pressure is not against the newly mined bitcoin, but against the total supply. So a lot has to be done. But nonetheless, I expect this business growing steadily over the next quarters. Remember that bitcoin is still tiny. The entire market cap of Bitcoin is equal to the market cap that Amazon raised in the month of July only(more or less 220 billions).

Coinbase holds around 1 million coins, that's 4.7% of Bitcoin's supply. And technically, Satoshi also owns 1 million coins, so he's also the biggest player in Bitcoin ecosystem, though he's disqualified cause he's inactive now.

Still, holding 2% of supply is pretty big. I wonder if there's any entity that holds 2% of all gold in the world?

Easy answer to this.

Approximately all the gold mined in human history is around 200,000 tonnes, that could be concentrated ona 22 meters cube

Total above-ground stocks (end-2019): 197,576 tonnes

• Jewellery: 92,947 tonnes, 47.0%
• Private investment: 42,619 tonnes, 21.6%
• Official Holdings: 33,919 tonnes, 17.2%
• Other: 28,090 tonnes, 14.2%
• Below ground reserves: 54,000 tonnes

https://www.gold.org/goldhub/data/above-ground-stocks

So central Banks are the Official Holding part, around 34,000 tonnes, andare for sure the most concentrated.

On the officially reported holdings ofGold Reserves chart, the US Treasury is stated holding around 8,000 Tons of GOLD: that would be around 4% of the total supply. Second place for Germany, with 3,800 Tons, or 1,7% o the total supply.
So the answer to your question is: "Yes, there is only one institution controlling more than 2% of the total Gold Supply: the US Government".


When speaking about "entities" I was actually referring to "financial instuments" controlling bitcoins, e.g. ETF's, ETP's , pension funds, or even listed companies, holding Bitcoins.

[fillippone]

Apparently the TV ad played out:

Grayscale investments enjoys it’s 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.

[fillippone]

Bloomberg published an interesting article about Graysale.
Nothing too new, but a couple of graphs are food for thoughts here.

First of all, a small recap of where we are, with ETP on bitcoin:



Of course GBTC is the name of the game, but other competitor are beginning to crowd the dance floor: particularly I am bullish on the BTCE ETP, being listed on a good number of European countries, thus being very widely reachable by a wide arena of investors.
Also We observed his pricing is quite consistent with the NAV. Here, my thread about this product: ETC Group to launch bitcoin ETP on Deutsche Boerse)

Still GBTC was able to hoover the vast majority of flows, he collected $ 1.6B in 2020 only, notwithstanding the very high premium of their shares over the NAV and their high management fees. To put this in perspective, this inflows is greater than 97% of every other ETF in the US.

Of course, as we have seen in the past posts, this is mainly due, in my opinion to the very favourable taxing deferral instrument status it sports.

The GBTC growth was phenomenal state, but in fact it is not "constant" they have burst in AUM, when they open their primary market share subscriptions. :

	You can find a very similar graph in the OP's spreadsheet

Those "peaks" are the shares subscribed in primary, and nothing gets me out of my head that at the end of the lock period, 6 months, they will be offloaded on the market to collect the premium. Nothing dramatic, but if by chance a couple of air pockets add up, there may be some shakes in the underlying BTC market. To give you an example in June, GBTC created more than 11 millions of shares (you can also check the worksheet), worth more than 100 mios $. Around Christmas this Year those shares will be available to sell: we will se what happen to the premium (and bitcoin price) by then).

This is something we should be accustomed to, but it is worth nothing these kind of market distortions are probably adding volatility.

In the end, looking at the first table posted above, I very much hope that other more "competitive" vehicles (a Bitcoin ETF in the US, for example) can steal shares from GBTC, leading to the compression of the premium on the NAV and therefore to a more competitive market.

A second kind of consideration arises from the reading of an article from Forbes:
20 Institutional Bitcoin Investors Revealed, But Soon The List May Vanish

This article analyse the SEC filing of institutional investors who subscribed the GBTC fund, and there is the following table included:



A somewhat bleak picture I would say, if the main investor in GBTC has put in only 20 million.

If you think about it, however, you shouldn't be too surprised. If I were a large institution seeking to enter bitcoin, that is, that does not already have Bitcoin in its portfolio, to be given "in kind", I would never choose to enter GBTC.
Of course, any institution looking to buy a stake in BTC would not buy on the secondary market at such an absurd premium over the NAV. But I also doubt that any institution will buy on the primary market with a six-month lock-up period. It would probably not be allowed by the investment mandates of many institutions. I believe that is why only such small investments from "low quality" funds appear on this list.
It is likely that a larger fund will decide to resort to more structured methods to have exposure to bitcoin, or maybe even they are through derivatives at the regulated "legacy" markets (CME and / or BAKKT), without having to pay the 2 annual commission. a manager of a passive fund.
Also remember that most of Grayscale's success comes from some sort of "tax arbitrage" that essentially allows investors to "defer" taxes permanently, as long as they trade on GBTC. An aspect that the institutions do not care about.

Also, let's remember what the list we are reading is:

The problem is, the vast majority of the institutional investors who filed the paperwork, called a 13F filing, will no longer need to do so if the SEC gets its way and raises the threshold to report from $ 100 million to $ 3.5 billion. Though bitcoin represents only a tiny fraction of the total assets that will no longer have to be disclosed if the change is implemented, the nascent industry stands to be disproportionately impacted.

This means that only institutions with assets under management over US $ 100 million should disclose their ownership. Of course, there are many other smaller foundations or even individuals with larger resources (over $2,000, for sure). The point is, they don't have to report to the SEC.

On a positive note: if the GBTC has amassed such a massive influx of money without proper institutional money, guess what might happen when/if the "real" institutions decide to invest!

[figmentofmyass]

On a positive note: if the GBTC has amassed such a massive influx of money without proper institutional money, guess what might happen when/if the "real" institutions decide to invest!

where do you expect that proper institutional money to enter? i reckon with GBTC's ridiculous premium and 2% management fee, there are better options emerging. i know wilshire phoenix and fidelity are cooking up a bitcoin fund with a 0.9% expense ratio.

any idea what bakkt's custody fees are? all i can find are the original fact sheets that state there was a fee holiday through june 2020.

[fillippone]

On a positive note: if the GBTC has amassed such a massive influx of money without proper institutional money, guess what might happen when/if the "real" institutions decide to invest!

where do you expect that proper institutional money to enter? i reckon with GBTC's ridiculous premium and 2% management fee, there are better options emerging. i know wilshire phoenix and fidelity are cooking up a bitcoin fund with a 0.9% expense ratio.

any idea what bakkt's custody fees are? all i can find are the original fact sheets that state there was a fee holiday through june 2020.

I didn't forget about your request, but it proved way more difficult to source this information than I originally tought. My men in Havana have , as usual, no clue about that, but I unleashed some new spy in the system. I will be back soon on this.

[fillippone]

Answering here to a post, because more in topic here.

I wonder if there are any other bitcoin ETPs or ETFs like BTCE that pose a reasonable alternarive to Grayscale. Specifically, one that is listed on a US exchange for US investors to buy. I can't seem to find any on Google.

The is a limited choice actually.

The situation in the US is pretty limited, this is particularly true for a private investor:



Being an accredited investors requires more available funds, (in the near future also an higher education) and implies a lesser contractual protection.
 

This explains (together with fiscal incentives) why Grayscale is able to maintain such a high premium to NAV: lack of competition.

In other part of the world the scenario is a little bit different, with more competition and products that are way cheaper:



I am very bullish on BTCE, passported and tradable in many European countries

[DougM]

As far as I know, Grayscale is by far the biggest player in the BTC ecosystem. As per the attached spreadsheet they now control more than 2% of the entire BCT supply. Square is getting bigger, and other competitors just started taking steps in this direction, given the huge amount of money to be made. Yet, the pressure is not against the newly mined bitcoin, but against the total supply. So a lot has to be done. But nonetheless, I expect this business growing steadily over the next quarters. Remember that bitcoin is still tiny. The entire market cap of Bitcoin is equal to the market cap that Amazon raised in the month of July only(more or less 220 billions).

Coinbase holds around 1 million coins, that's 4.7% of Bitcoin's supply. And technically, Satoshi also owns 1 million coins, so he's also the biggest player in Bitcoin ecosystem, though he's disqualified cause he's inactive now.

Still, holding 2% of supply is pretty big. I wonder if there's any entity that holds 2% of all gold in the world?

Question: if coinbase is the custodian for grayscale would coinbase's 4.7% include grayscale's 2%?

Most notable ones are the Index Provider being Tradeblock and Coinbase as custodian.
This means all the computations are executed on the back of Tradeblock price computations (more details on this later) and that the assets are held on a cold wallet at Coinbase.

[fillippone]

Question: if coinbase is the custodian for grayscale would coinbase's 4.7% include grayscale's 2%?

I have no proper evidence, but my feeling is yes, that figure is including Grayscale 2%.
This make sanse on a legal  point of view, as Coinbase said is custodian for 4.7%, so that includes the BTC owned by third party clients. Being custodian is different by being the owner (in legal terms).
Also this makes sense from a marketing point of view, where you want to appear the big swinging dick in the room.

[SquirrelJulietGarden]

Grayscale bought BTC for $ 690M in the last 100 days. It is an update for your topic on Grayscale and I am happy to give you the link. Grayscale investment activities can be used to predict market movements but those things can happen before article release time (days or weeks).

Do I apply the rule "buy the rumor, sell the news"?

[fillippone]

Grayscale bought BTC for $ 690M in the last 100 days. It is an update for your topic on Grayscale and I am happy to give you the link. Grayscale investment activities can be used to predict market movements but those things can happen before article release time (days or weeks).

Do I apply the rule "buy the rumor, sell the news"?

I posted a quick answer in that thread, but you gave me an idea and I am going to develop from it.
And my quick answer is no, they are not manipulating the market, but of course you have to keep an eye on those days where the lockup period ends, six months after meaningful capital injections. Those days could be a catalyst for sells, if the momentum of BTC is already pointing south.

[fillippone]

I finally had a few hours to look into @ratimov thread with a little bit of time.
I am referring to this one:
Grayscale bought BTC for $690M in the last 100 days

I updated my spreadsheet and I came up with this results:



On the last two columns you can see the expected inflows (both in USD and BTC) for each quarter.
They differ a little bit from the ones the reddit users obtained, supposedly on the same data. So I contacted him, and we might discover something useful!

I also (tab History) computed the cumulated BTC inflows over the last 100 days: again the results ar a bit off his calculation, but the impressive rally stays valid.

Also we are a little bit inside Q3, and it is going to be slower than Q2:



So don't be surprised when "disappointing data" come out, you red it here first!

[fillippone]

I played a little bit with the spreadsheet , trying once again to reconcile the nubers from the reddit post linked by @Ratimov.
Our sources are different, and I cannot understand why.
My Outstanding shares comes from Bloomberg, and it is a fairly reliable source.
I also doublechecked the information with Webarchives.org and seems correct. I asked Parakite, the reddit post author, about his sources, but he seemed less available to a double check.

So I went on, and I started studying how the "bitcoin per share" is crunched, trying to find an alternate way to discover inflows.

Well this made me realise that Grayscale holds roughly 400,000 Bitcoin.
He has a management fees of 2%.
This means grayscale is profiting, from management fees only, no risk, no question answered, roughly 8,600 BTC per year, or 24 BTC per calendar days.
This is a yuge profit.

I guess there is space for competitors!



You can check yourself here: spreadsheet

EDIT: corrected a typo thanks to @Karartma1

[Karartma1]

This means grayscale is profiting, from management fees only, no risk, no question answered, roughly 1,200 BTC per year, or 24 BTC per calendar days.

I am open to be taken for a fool......but 1200/365=3.2876. Am I right? It can't be 24 btc per calendar day otherwise it should be 24*365=8760
So management fees profit per day is roughly 3.28BTC.
Huge and decent profit anyway, no questions asked.

[fillippone]

This means grayscale is profiting, from management fees only, no risk, no question answered, roughly 1,200 BTC per year, or 24 BTC per calendar days.

I am open to be taken for a fool......but 1200/365=3.2876. Am I right? It can't be 24 btc per calendar day otherwise it should be 24*365=8760
So management fees profit per day is roughly 3.28BTC.
Huge and decent profit anyway, no questions asked.

You are absolutely right. I had to rush a bit the post and ended up forgetting to properly edit on the final version.
They hold 430,000 BTC, a management fee of 2% means 8,600 BTC per year, this equals to almost 24 BTC per calendar day!

[Karartma1]

This means grayscale is profiting, from management fees only, no risk, no question answered, roughly 1,200 BTC per year, or 24 BTC per calendar days.

I am open to be taken for a fool......but 1200/365=3.2876. Am I right? It can't be 24 btc per calendar day otherwise it should be 24*365=8760
So management fees profit per day is roughly 3.28BTC.
Huge and decent profit anyway, no questions asked.

You are absolutely right. I had to rush a bit the post and ended up forgetting to properly edit on the final version.
They hold 430,000 BTC, a management fee of 2% means 8,600 BTC per year, this equals to almost 24 BTC per calendar day!

Don't worry it always happens when we need to rush things. Wow! That's a lot of corn! 24 BTC per calendar day is unbelievable. We need to think some sort of service like that, I believe even 0.24 per day would work 
Thanks for sharing your work

[Lucius]

They hold 430,000 BTC, a management fee of 2% means 8,600 BTC per year, this equals to almost 24 BTC per calendar day!

According to the latest information, Grayscale has bought another 17 100 BTC in the past 7 days, which means that they have approached the total amount of almost 450 000 BTC with a total value of $4.8 billion.

Over the past week, digital asset management firm Grayscale Investments has increased its reserves by 17,100 Bitcoin (BTC), according to its website and crypto analytics platform bybt.com. That’s an increase of $186.5 million.
As a result, the GBTC Bitcoin trust, which was created in 2013, now amounts to nearly 450,000 BTC—or $4.7 billion. This corresponds to 2.5% of the amount of Bitcoin in circulation.

Their customers don’t seem to give up, and the current price is obviously more than affordable - and after the purchase the market reacted so the price is very close to $11000.

[fillippone]

They hold 430,000 BTC, a management fee of 2% means 8,600 BTC per year, this equals to almost 24 BTC per calendar day!

According to the latest information, Grayscale has bought another 17 100 BTC in the past 7 days, which means that they have approached the total amount of almost 450 000 BTC with a total value of $4.8 billion.

Over the past week, digital asset management firm Grayscale Investments has increased its reserves by 17,100 Bitcoin (BTC), according to its website and crypto analytics platform bybt.com. That’s an increase of $186.5 million.
As a result, the GBTC Bitcoin trust, which was created in 2013, now amounts to nearly 450,000 BTC—or $4.7 billion. This corresponds to 2.5% of the amount of Bitcoin in circulation.

Their customers don’t seem to give up, and the current price is obviously more than affordable - and after the purchase the market reacted so the price is very close to $11000.

It's nice I can confirm the news:





Apparently my spreadsheet is capable of tracking those information.
Only thing I need to automate is the updating the data, I have to do that manually, but once I update those, the outlook is consistent.
 

[fillippone]

Today is the last day of the quarter. Tomorrow I will try to sum up the quarter and guess estimate the official announcement by Grayscale before they publish those. I am curious if I will be smart enough to guess the right outcome.