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Author Topic: Everything you wanted to know about Grayscale BTC Trust but were afraid to ask!  (Read 16343 times)
fillippone (OP)
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December 01, 2020, 11:10:49 PM
Last edit: May 16, 2023, 12:58:29 AM by fillippone
 #101

November has just ended, and it was a truly impressive month for Grayscale.

In November Grayscale bought more Bitcoins than they did in September and October Combined.



They are regularly outpacing (don't nitpick September) the daily mined bitcoin number since last August, I said many times that this comparison is quite naive, but it serves the idea quite well.

This put them in pace for a monster fourth quarter:



They are projected to buy more than 130,000 Bitcoin until the end of the year. I think they are actually going to easily beat that number, unless they close the primary market.
130,000 Bitcoin is an outstanding number, comparable with Q3 and Q2 combined. This would put EOY Grayscale AUM in Bitcoins at  over 580,000 BTC, or more of 3% of mined Bitcoins.






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December 02, 2020, 07:41:25 AM
Merited by fillippone (2), vapourminer (1)
 #102


<…>
All asset and wealth management firms rip-off their clients with unnecessary fees and premiums on their services. It doesn't matter if it's bitcoin or oil or an AI technology index. They will suck the lymph out of their clients' money to grease their never-ending mechanism.
It doesn't surprise me. And 2%, to be honest, doesn't look very high to me.

Are you kidding me? Many ETP’s (general definition for Exchange Traded Products) have a 0.25% fee. Some have a 0% fee. 0.50% fees means there is a special feature on those.
Also do you know how much is it 2% yearly? If you buy a single bitcoin in GBTC after 5 years of holding you are left with 0.904 BTC.
I don’t like that.

I get what you mean man, but remember grayscale is not for us (otherwise they would have never reached those massive numbers). That is the price to pay to get exposure to btc for those overly rich companies, trust and entities which drown in useless fiat and need to diversify into btc.
May I be provocative here? What if we are in front of an institutional washing machine?
Who knows.
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December 02, 2020, 01:04:08 PM
 #103

May I be provocative here? What if we are in front of an institutional washing machine?
Who knows.

Well, this is an interesting point.
2% there would be a very competitive cut indeed. Usually those kind of operations runs at 30% cut.
I don't know the technicalities here. I guess it would be difficult to pass the KYC/AML assessment while providing your Bitcoin (I guess the most probably way of doing a wash would be trough a in-kind buying).
I don't think it would be easy, but maybe possible.


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December 06, 2020, 04:51:41 PM
Last edit: May 16, 2023, 12:56:10 AM by fillippone
 #104

I recently bumped into ByBit Grayscale page.

It's s a nice summary of Grayscale, with various information:


[link]

Well, I wanted to doublecheck those information with the ones I already Enclosed on my Spreadsheet.
The result is that they overlap almost exactly:



[link]

There are a few notable differences:

  • My Spreadsheet don't consider days where markets are closed, to it is actually a snapshot at Friday's COB values. The website instead updated at fixed times during the days, hence the flat difference over the last day (+ 0BTC vs Yesterday). During the week the worksheet are aligned. There is a little difference on the 30 days difference: I still have to understand why.
  • I added a few information I think are relevant, and I already calculated in the spreadsheet: Restricted Shares (i.e. shares aren't freely available on the market to sell), total Grayscale holding in %age of total mined Bitcoins and the sum of daily fees for Grayscale, considering a 2% annual feed on the outstanding amount.





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December 06, 2020, 05:56:35 PM
 #105

I've read the description but I still can't understand how Grayscale market works and whether it is different from a ponzi. I have several questions:
1. From whom registered clients purchase Bitcoins - from Grayscale (with a premium I guess) or from other clients like a regular exchange works?
2. To whom registered clients sell Bitcoins - to Grayscale or to other clients?
3. Who is forming the buy/sell prices - Grayscale or the clients?
4. Everyone is talking about Grayscale buying bitcoins, but what about selling? Are they selling in the spot market at all?

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December 06, 2020, 10:34:06 PM
Merited by JayJuanGee (1)
 #106

I've read the description but I still can't understand how Grayscale market works and whether it is different from a ponzi. I have several questions:
1. From whom registered clients purchase Bitcoins - from Grayscale (with a premium I guess) or from other clients like a regular exchange works?
No, registered clients, or rather accredited investors, can actually buy shares (not bitcoins) from Grayscale. They buy them at NAV value, without the premium usually attached to shares in the secondary market, the one all of us can access to.
Also they can buy shares with an in-kind purchase. This means they can purchares shares representing bitcoin with actual bitcoins.

2. To whom registered clients sell Bitcoins - to Grayscale or to other clients?
3. Who is forming the buy/sell prices - Grayscale or the clients?

 All clients, both registered or unregistered, sell their shares to other clients. Grayscale is never involved in the secondary market, not they mandated any market maker to develop a liquid market.

They state in the website:

Quote

Because each Product does not currently operate a redemption program, there can be no assurance that the value of such Product’s shares will reflect the value of the assets held by such Product, less such Product’s expenses and other liabilities, and the shares of such Product, if traded on any secondary market, may trade at a substantial premium over, or a substantial discount to, the value of the assets held by such Product, less such Product’s expenses and other liabilities, and such Product may be unable to meet its investment objective.

This means, basically: as per investment rules and prospectus, we Grayscale are not concerned or take part in any way of what happens in the secondary market.
Clients independently form the price according do demand/offer pressures prevailing at the moment.

4. Everyone is talking about Grayscale buying bitcoins, but what about selling? Are they selling in the spot market at all?
Which selling? According to my spreadsheet Grayscale had 8 negative days. The last of those happening in Sep 2014. Client Buying shares greatly outnumber clients willing to sell. Net movement so is almost everyday net positive.


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December 07, 2020, 01:13:30 AM
 #107

No, registered clients, or rather accredited investors, can actually buy shares (not bitcoins) from Grayscale. They buy them at NAV value, without the premium usually attached to shares in the secondary market, the one all of us can access to.
Also they can buy shares with an in-kind purchase. This means they can purchares shares representing bitcoin with actual bitcoins.
Buy shares with the supports from Grayscale but what those buyers (also clients on Grayscale) have to do to cash out if they want to take profits. Will they have to do this action via Grayscale? Submit their sell requests/ tickets and wait for acceptance from Grayscale? How long the process can take or it can be done immediately (few seconds or a few minutes)?

From last part of your post, I got the idea that Grayscales allow clients to be free to buy or sell shares of bitcoin on Grayscale' secondary market and it is a 24/7 market. Is it right?
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December 11, 2020, 08:25:10 PM
 #108

Surfing news-feed on Coinbase. It's impressive, isn't it?
In the past week, Grayscale has added an additional 14,591 Bitcoin & 105,000 ETH to their holdings.


Many people do not like and the objection is, it is not right for a group to have a significant amount of BTC.
But the biggest fact is you can't prevent them. Many may wonder why the price of Bitcoin is not crossing ATH after they investing so much.
In response, They just buy Bitcoin and sell the share, generally, they buy bitcoin directly from the miners at a lower price.
Ever wondered what would happen when miners won't have enough bitcoin to sell!

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December 15, 2020, 10:43:20 PM
Last edit: May 16, 2023, 12:53:18 AM by fillippone
 #109

Well, I wanted to doublecheck those informations with the ones I already Enclosed on my Spreadsheet.
The result is that they overlap almost exactly:



[link]

Only putting those images side to side one can realise the pace of Grayscale buying:



A little bit less than 20,000 BTC (more than 0.10% of total Bitcoin supply) in less than 10 days. 1 full BTC more in the daily management fee.

177,000 bitcoin bought in the last 100 days means they are now in track to buy in this last quarter more than the last two quarters combined.

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December 21, 2020, 11:38:39 PM
Last edit: May 16, 2023, 12:49:28 AM by fillippone
Merited by Lucius (1)
 #110

Apparently Grayscale has stopped accepting new investors on six of his funds:


https://grayscale.co/startinvesting/select-product/

If you are a new investor, you are not allowed to buy shares on six of Grayscale finds.

Coindesk (a member of the same parent company owning also Grayscale) reported a few interesting bits on the news:


Grayscale Investments LLC has temporarily stopped accepting new investors in six funds, including its Ethereum Trust and Bitcoin Trust funds, both gateways for institutional crypto bets.
  • The crypto asset manager's website said Monday that its Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin and Digital Large Cap Fund Trusts are "currently unavailable" for new investors.
  • Grayscale periodically closes off its crypto trusts to so-called "private placement" rounds. Such action happened repeatedly to GBTC in Q4 2019 – so the Monday halting is not unusual.
  • Even with the temporary closing to new investors, Grayscale will still be able to obtain added capital from existing investors until it reopens again to new investors. On Monday JPMorgan analysts wrote that a dramatic slowdown in GBTC inflows could jack up the odds of a bitcoin (BTC, -1.85%) price correction.

Well, this is a piece of strange news: they are blocking new investors, but he who is already a shareholder can buy mode Grayscale closed product.

From my spreadsheet, we see they were going full throttle toward a record quarter.



So, while inflows from new subscribers are closed, the ones who are already investing in GBTC poured an additional 4,000 BTC today into the system.
Immediately the premium soared, reaching 40%, a level not seen since last February: fancy buying Bitcoin at 32,000? A lot of people, willing to get exposure to bitcoin scrambled buying a share in GBTC.


I spent this whole thread trying to figure out how people are willing to pay 40% premium on market price, but failed. 


They are still on track to have spectacular growth this quarter: it will be by far the biggest in history exceeding the two previous quarters combine as they are expected to rack up 143,000 bitcoins against the 134K raised in the two previous quarters.


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December 23, 2020, 11:42:34 AM
Last edit: May 16, 2023, 12:49:14 AM by fillippone
 #111

Wow.
Grayscale just had their best day ever despite being closed to new customers!



They had 12,319 BTC inflows: the biggest to far in the history of the fund:



Investors are literally throwing Bitcoins at them!
and they are happily guzzling those as they are now sitting on a 32.2 BTC DAILY fee!


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December 23, 2020, 03:14:45 PM
Merited by fillippone (2)
 #112

and they are happily guzzling those as they are now sitting on a 32.2 BTC DAILY fee!

Cheesus. I knew it was big, but this is ridiculously big. Bitcoin bouncing back every time now in earnest as soon as it goes below 23k, wonder how many routes are drying up now filling orders for Grayscale. Not to mention all the big guns now lining up at off-chain OTC brokers.

Wondering now also how these guys are stacking up in Europe with AMLD5 requirements. Hearing a lot of chatter now about Proof of Funds documentation.

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December 23, 2020, 04:00:22 PM
Merited by fillippone (2)
 #113

So, while inflows from new subscribers are closed, the ones who are already investing in GBTC poured an additional 4,000 BTC today into the system.
Immediately the premium soared, reaching 40%, a level not seen since last February: fancy buying Bitcoin at 32,000? A lot of people, willing to get exposure to bitcoin scrambled buying a share in GBTC.

I spent this whole thread trying to figure out how people are willing to pay 40% premium on market price, but failed.

And I wonder how that's possible, but there's certainly a catch - because how else to explain that someone buys something and pays $10k more than on the free market? I may be wrong, but there seem to be a lot of people who would invest in BTC, but they have no idea how to do it any other way than to do it through a fund by buying share.

At the same time, regular crypto users buy through exchanges and complain about fees of 1% or 2% Roll Eyes

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December 23, 2020, 04:43:07 PM
 #114



And I wonder how that's possible, but there's certainly a catch - because how else to explain that someone buys something and pays $10k more than on the free market?

Don't get me wrong.
I am not surprised by human nature: people like do strange things; if they think it is in their best interest to overpay BTC, that's fine with me.
I don't condemn Grayscale for the service they are offering to such clients: a flawless, hassle-free, bitcoin ("bitcoin-line", actually) experience, for only 2%, as they are not directly profiting from the premium on the NAV
I am not worried about the loss of business when a competitor will gain market share, compressing the "bitcoin-like
My only concern is that an implosion of Grayscale, and the subsequent selling outright,  would impact the BTC market price.


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December 23, 2020, 11:23:56 PM
 #115

Another big day for Grayscale.
More than 8,700 BTC on DEC 23, or 200,000,000 USD. Considering yesterday inflows we are at more than 20,000 in 48 hours.
They are now very near 600,000 BTC as AUM.  Impressive, as they got to 500,000 a little bit more than a month ago (Nov 13th).

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December 24, 2020, 11:48:11 AM
 #116

Don't get me wrong.

Of course, I understand what is the main reason Grayscale is so popular, you gave all the reasons in your post. The whole thing clearly shows us that the interest in investing in BTC is growing, but also that investors are looking for the easiest possible way for such investments. I know some people who trade stocks, they were interested in BTC, but the whole thing seemed too complicated for them and they never decided to buy BTC
 
My only concern is that an implosion of Grayscale, and the subsequent selling outright,  would impact the BTC market price.

I think this is something that worries many, because so much BTC in one place at any given time poses a risk in every way. If they continue at this pace, they will probably reach 1 million BTC by the end of the second quarter of 2021, and maybe even sooner.

What surprises me the most in this whole story is that the price of BTC is still relatively low in spite of everything - so even though the OTC is probably responsible for that, I just wonder how much BTC actually exists in that market?

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December 24, 2020, 12:16:37 PM
 #117


What surprises me the most in this whole story is that the price of BTC is still relatively low in spite of everything - so even though the OTC is probably responsible for that, I just wonder how much BTC actually exists in that market?

This is a very important point.
We often see Grayscale buys compared to newly mined Bitcoin, and I also do this comparison on my spreadsheet in one of more places. But this is actually a little bit naive: the vast majority of GBTC buyers are actually whales selling their long hodled coins in order to cash in some FIAT counter value.

The real market where Grayscale is operating then it is not the tiny amount of minted Bitcoins, but the actual vastity of the Bitcoin Supply.
How much of those 18 million coins is actually available to sale, that's a crucial question to answer.
But I think also we might ignore the right answer as long as the Stock to Flow model is not broken.

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December 24, 2020, 03:44:36 PM
 #118

We of course know that Grayscale is not buying virgin BTC, and that this is just one nice comparison that shows how small the production of new coins is compared to what the market is currently looking for. I read somewhere that someone estimates that the size of the OTC market is larger than is the case with publicly available BTC, and despite speculation that up to 5 million BTC has been lost, I wouldn’t bet on that.

When you put yourself in the shoes of these big investors then you can understand how the whole situation is going their way - because despite the huge money flowing into BTC the price is still (for them) acceptable, and at the same time the average Joe curses the pandemic because he didn’t have the money at the time he wanted to invest, and now he thinks the price is too high and waiting for another big correction.

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December 24, 2020, 06:15:32 PM
 #119

We of course know that Grayscale is not buying virgin BTC, and that this is just one nice comparison that shows how small the production of new coins is compared to what the market is currently looking for. I read somewhere that someone estimates that the size of the OTC market is larger than is the case with publicly available BTC, and despite speculation that up to 5 million BTC has been lost, I wouldn’t bet on that.


Well, I really would like to know more about that (let me know if you can recover that article).
I know there are maybe 5 to 7 millions lost Bitcoins, so just wondering how many of the residual BTC are being actively traded. I think we have little way to discover that, besides disclosures from OTC MM desks themselves or even looking at graph like hodlwaves.

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December 25, 2020, 05:49:59 PM
Last edit: May 16, 2023, 12:48:47 AM by fillippone
 #120

A third incredible day for Grayscale:



With another 9,607 BTC inflow yesterday (the sixth-best day ever) they surpassed 600,000 BTC of AUM, with 30,700 BTC guzzled in 3 days.
I guess Barry will have a nice Christmas. Of course, they will cash in their 33+ BTC daily fee also during closed days, like Christmas.

At this point, I can see them racking up in the fourth quarter as many BTC as the first three quarters of 2020.




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