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

[aesma]

These fees must pay for top notch security experts...

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.

Investors are buying stuff at any price right now. Tesla stock, supercars, fine wines and liquors, everything is overpriced. Or another way to say it : there is too much fiat in circulation, concentrated in the hands of too few people. So it's not that BTC is cheap for them, it's that they have too much money anyway (and want to stay rich, of course).

[Searing]

Well, what do folks think? Is GrayScale, as the article below states, the only real driver of Bitcoin price approaching $25,000.00 USD?

Really? You'd think there would be some more 'copycats' piling on than the few I see. But you really, really, have to admire GrayScale's 'Big Brass Balls',

in how they bought 16,000 BTC like 2 'frigging' days before Christmas. But the question is, are they just at the lead of the pack of institutions jumping in?

Or are they an 'outlier' and simply gonna fade when they are full up on cheap Bitcoin and this is their long term strategy..even if they cause Bitcoin to dump

30-35% with the massive buys they've been doing.

Article below:

https://www.investopedia.com/grayscale-trust-gbtc-is-key-to-bitcoin-price-jpmorgan-5093550

I particularly like this quote below:

quote:

JPMorgan's strategists write that the inflows into GBTC "are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics." In other words, investor enthusiasm for GBTC shares is a determinant of Bitcoin's price trajectory, and other Bitcoin traders do not possess sufficient market share or Bitcoin holdings to influence a correction in the cryptocurrency’s price.

It is difficult to gauge the extent to which GBTC influences Bitcoin prices (or vice versa) because there is little transparency to the Bitcoin ecosystem. The thin liquidity of the cryptocurrency's markets also adds to the problem. What is certain, however, is that GBTC shares benefit from a rise in Bitcoin price, enabling it to purchase more of the cryptocurrency for its holdings.

unquote.

I really like all of the above Grayscale news link above... but especially like the line of "JPMorgan's strategists write that "What is certain, however, is that GBTC shares

benefit from a rise in Bitcoin price, enabling it to purchase more of the cryptocurrency for its holdings.

I mean frigging really, rinse/wash/repeat? Also, is GrayScale simply the 'first' of many to come on board as Institutions looking at Bitcoin

and are simply 'late to the party as of now?" Gonna jump in with their own splash here soon?

Damn, I sure hope so. I'd love to see a mess of Trusts and Institutions scrambling to get into Bitcoin...in a mass FOMO first and then this would cause a mass

FOMO for regular folk to copy. That would be the best thing ever.

Well, chump or champ, we will be the first to know I guess. But never expected this over kinda play at these Bitcoin prices over Christmas week...but it looks

like GrayScale anyway is not expecting a holiday dump in price from now till New Year's day or beyond.

Sheesh. This is a fun ride!

As usual, Boom or Doom we will be the first to know

Brad

[fillippone]

JPMorgan's strategists write that the inflows into GBTC "are too big to allow any position unwinding by momentum traders to create sustained negative price dynamics." In other words, investor enthusiasm for GBTC shares is a determinant of Bitcoin's price trajectory, and other Bitcoin traders do not possess sufficient market share or Bitcoin holdings to influence a correction in the cryptocurrency’s price.

Before further commenting on this article, let me find and read the original piece. As the reporting from investopedia looks very confusing to me.


On a separate note, today is a bank holiday, so we have a little time to read a tale from one of the most renowned Cyberpunks: Jameson Lopp, loosely regarding Grayscale:


How the SEC Nearly Destroyed my Retirement Account

I've held GBTC in my 401K for a number of years so that I could get exposure to bitcoin in my tax-advantaged retirement account. However, GBTC has issues with large premiums as high as 100% since buying a share of GBTC does not result in the underlying Grayscale Bitcoin Investment Trust acquiring more bitcoin.

This is interesting, as it sheds some light on the reasons why a true bitcoiner, would like to get long on those instruments, even if, as we read, some drawdowns have to be considered.

[Altcoinsintel]

I wonder if there are stats for trading volumes for the OTC market this BTC Trust is traded. It could be something the investors seen to have high interest lately and jumped on board.

[fillippone]

Grayscale just announced their daily results.
Aparte for the blatant claim of record AUM, simply due to the rise in BTC price. I noticed they still had no flows:



This is weird, they closed their funds to new investors, allowing existing investors to increase their size, but apparently, something changed since Dec 24, and they aren't even selling even a single share.

On a side note, we see that without inflows, Bitcoin under management fell from 607,274 to 607,108. These 166 BTC are the daily commission, accruing at a daily rhythm of 33.5 BTC!


I will try to find out more about the fact they changed their fund status to closed. It's a pity in case, as they could have bought in the Q4 more bitcoins than the sum of the first three 2020 quarters!



EDIT: They have actually closed the subscription for everyone.
Visiting the website, this banner informs you private placements (issue of new shares) is temporarily closed for everyone:

[fillippone]

I wonder if there are stats for trading volumes for the OTC market this BTC Trust is traded. It could be something the investors seen to have high interest lately and jumped on board.

For sure.
The secondary market shares are quoted on the OTC market.

You can find all the relevant information on the following page:


https://www.otcmarkets.com/stock/GBTC/overview

On the overview tab you can find the information you are looking for:



I think I posted this information in the OP.

[JayJuanGee]

EDIT: They have actually closed the subscription for everyone.
Visiting the website, this banner informs you private placements (issue of new shares) is temporarily closed for everyone:

Maybe they are having trouble sourcing a sufficient quantity of coins in order to make sure that they have all the orders covered (and are not engaging in fractional reserve issuance - which they might already be fudging a bit and trying to make up for it. .. but having troubles if the BTC price is rising faster than what they had expected?)

[fillippone]

Maybe they are having trouble sourcing a sufficient quantity of coins in order to make sure that they have all the orders covered (and are not engaging in fractional reserve issuance - which they might already be fudging a bit and trying to make up for it. .. but having troubles if the BTC price is rising faster than what they had expected?)

This is a very interesting point. Of course, they have been buying BTC at a hectic pace during the last quarter, almost half of the whole bitcoin they bought in 2020 were bought in the last three months.
Certainly, they might have exhausted the whales they were sourcing their coins from.
Also, it will be very interesting how many of those coins were in-kind contributions i.e. whales putting their coins directly into the GBTC fund, to gain from tax arbitrage, presumedly.
 

[JayJuanGee]

Maybe they are having trouble sourcing a sufficient quantity of coins in order to make sure that they have all the orders covered (and are not engaging in fractional reserve issuance - which they might already be fudging a bit and trying to make up for it. .. but having troubles if the BTC price is rising faster than what they had expected?)

This is a very interesting point. Of course, they have been buying BTC at a hectic pace during the last quarter, almost half of the whole bitcoin they bought in 2020 were bought in the last three months.
Certainly, they might have exhausted the whales they were sourcing their coins from.
Also, it will be very interesting how many of those coins were in-kind contributions i.e. whales putting their coins directly into the GBTC fund, to gain from tax arbitrage, presumedly.

Not wanting to belabor any point but many of us already realize that for any third party, there might be temptations to play the books a bit in terms of the fractional reserves, even if it is a matter of only a few days in which coins might have been sold to GBTC clients, but those coins were not actually on the books - and maybe at some point, the whole situation gets a bit messy in terms of reconciling the books. 

Yes, I understand that you, fillippone, have already pointed out that GBTC is under more strict regulatory requirements than the vast majority of the potentially loosey goosey exchanges that are in the space, so they may well get into considerable trouble if they are NOT maintaining sufficient backing of coins, even for short periods of overlap - but in the end, there are likely various practices of acquiring coins that result in a kind of fractional reserve that either might not get caught or might be tolerated to be within accepted practices...

So, in that regard, even with minor playing around with the timing of client purchases and acquisition, GBTC could end up getting into a bit more of a pickle than they had anticipated, especially when the BTC price has been moving quite crazily in the continued upwards direction - which we know that there has hardly been any meaningful correction in terms of depth or length of time from around $10k all the way to our present price, which makes us HODLers feel good, and makes the bears feel bad because they continue to get reckt.. when they keep anticipating the run to be over, and such run is not over.  and such ongoing persistent UPpity likely even puts some stresses on people/institutions who are mostly trying to follow the rule sna mostly betting on UPpity.. but still are gambling a wee bit too much in terms of the level of UPpity really ending up showing who is swimming naked, the longer that it takes place, and some institutions like michael saylor and some like minded folks/institutions might really want to teach a lesson to anyone/institution fucking around with fractional reserves by continually pushing the BTC price UPpity.. even when any reasonable chartalist would expect it to correct at any moment.. and it does not... I say fuck the fractional reservists (if that is what is going on with any of the institutions) if they do not have enough coins to cover their clients. 

[fillippone]

End of Year for Grayscale.
Let's see at the numbers.

First, their official tweet:

12/31/20 UPDATE: Net Assets Under Management, Holdings per Share, and Market Price per Share for our Investment Products.

Total AUM: $20.2 billion

$BTC $BCH $ETH $ETC $ZEN $LTC $XLM $XRP $ZEC

https://twitter.com/Grayscale/status/1344760425322323975?s=20

Let's put these numbers on a historic perspective:



AUM growth has been impressive in the last quarter:

• AUM increased 343% on a QoQ Basis.
• AUM increased 1000% on a YoY Basis.
• Best performer is the Liteecoin Fund, with a 542% increase QoQ.

The biggest growth was registered once again in the Bitcoin Fund which is now more than 86% of the total AUM:






Let's dig in the numbers we came up in this thread:

First, the raw quarterly data for the Bitcoin Fund Only: 



These are massive numbers we already know if you have been a fellow reader of this thread:

• 2,861 Millions of inflows in the quarter, more than the inflows since fund inception.
• 159,833 BTC bought during the last quarter. This means almost the double of the mined Bitcoins in the quarters and more than all the bitcoins bought in the two preceding qurters
• 2,584 BTC collected in fees in this quarter only (more than 33 BTC daily).
• GBTC holds 607,037.94 BTC or the 3.27% of the total issued BTC's

GBTC growth has been exceptional, both in BTC terms, due to a surge in shares issuing, and in AUM terms, due to a rise in BTCUSD valuations.




Inflows have been actually increasing on a month on month basis since September




The premium was very high across all the quarter, signalling a good inflow pressure, that slightly eased when the fund progressively closed to investors.



If we look at the premium across the various funds we see that the GBTC premium has to be considered low, if compared to other funds.



Buying a share of the Litecoin fud at those levels would now equate to buying LTC at a whopping 3,123 USD!

It's has been an incredible quarter for GBTC. Numbers show the pressure to buy that instrument and are a hint of the demand there is in the open market for a liquid, fungible, tax-efficient instrument to get long bitcoin from a variety of investors.
If GBTC has become too big for the market, as JPM suggested, well only time will tell. For sure the arrival of an ETF on the market is closer (today Vaneck re-filed their ETF submission, and this is going to massively hurt their business model.

[thecodebear]

I believe Grayscale closes their Bitcoin fund for investment once every 6 months (last time was like late June) for a few weeks when their lock out period ends. From what I understand, the lock out period is a 6 month period in which accredited investors can buy shares but can't do anything with them. After 6 months they can sell GBTC shares on the open market, but for whatever reason Grayscale takes a few week break from allowing investments immediately following the end of the lock out period - maybe to give current investors time to sell their shares on the open market at a premium and then be ready to re-invest at the start of the new 6 month lock out (investment) period?? I dunno. But I believe now that they are in this period of having closed investments in the trust it won't be open again until late January, thereby starting the next 6 month investment period.

A note on price:
Consequently this month is probably the best chance at a correction in price, because by end of this month weekly if not daily 9 figure Bitcoin buys by Grayscale will resume, eating up pretty much anything sellers could drop on the market. Of course this doesn't stop companies and other investment funds from continuing to buy Bitcoin as they have been this Fall, so even without Grayscale it might be hard to get a serious correction this month.

[thecodebear]

Wow looking at Grayscale's announcement from 12/29 above, they went into Christmas, and closed out this 6 month investment period, with 3 straight days of over $200 million being dumped into the Bitcoin trust. Over $700 million invested in 3 days. That's insane. I wonder what 2021 is going to be like. I'm guessing the numbers go up at the end of the 6 month lock out period as investors pile in to get their last buys in before the Bitcoin Trust investments close down for several weeks, but still that is just nuts. No wonder the price went from $20k to $25k in a week. Though also impressive is that even without Grayscale buys the price then proceeded to go from $25k to just under $30k in the week since that! I'm guessing there was a bit of retail FOMO though this past week as families came together for the holidays and talk of Bitcoin swirled around dinner tables.

[Lucius]

No doubt these are really impressive numbers, but while it’s understandable that we’re mostly focused on BTC, it personally surprises me when I see that someone still prefers altcoins for their investment - even though they make up only about 10% of the fund, it’s a fair amount of money. It would be really interesting to find out if these investors are really convinced that some other cryptocurrencies will bring them a profit, or they are guided by the philosophy that it is better to buy xx/x amount of some altcoin than a much smaller amount of BTC.

As for the ETF, the question is whether the SEC is still firm in its position that investing in BTC is still very risky because of what they say "bitcoin is traded on largely unregulated exchanges, leaving it susceptible to fraud and manipulation". The question is how much has changed in the past 2-3 years in this regard, which again can be a very subjective question - some will say a lot, while the SEC may say that nothing has changed. I am sure that we will find out the answer in 8 months at the latest, when the deadline for the SEC to comment on its decision expires.

[fillippone]

No doubt these are really impressive numbers, but while it’s understandable that we’re mostly focused on BTC, it personally surprises me when I see that someone still prefers altcoins for their investment - even though they make up only about 10% of the fund, it’s a fair amount of money. It would be really interesting to find out if these investors are really convinced that some other cryptocurrencies will bring them a profit, or they are guided by the philosophy that it is better to buy xx/x amount of some altcoin than a much smaller amount of BTC.

As for the ETF, the question is whether the SEC is still firm in its position that investing in BTC is still very risky because of what they say "bitcoin is traded on largely unregulated exchanges, leaving it susceptible to fraud and manipulation". The question is how much has changed in the past 2-3 years in this regard, which again can be a very subjective question - some will say a lot, while the SEC may say that nothing has changed. I am sure that we will find out the answer in 8 months at the latest, when the deadline for the SEC to comment on its decision expires.

Well, as you might know, I am not interested at all in any shitcoin, but I wanted to check how the XRP performed. There have been a few rumours, later denied by Grayscale, about large withdrawals in the XRP funds following the SEC action. I am trying to setup a spreadsheet with all the data, hope I will be able to complete it soon.

Regarding the ETF, I think that if Bakkt and above all CME think their reference price is liquid and secured enough to be used to settle billions of dollar of open interest, well, why the SEC should disagree? I think that they will find a way to have a "walled-garden exchange average" that they can consider liquid and safe enough to be used t settle an ETF. Their lack of cation is more and more specious every day it passes and let Grayscale collect huge fees or Microstrategy shares being traded as a BTC fund.

[fillippone]

<...>
Well, as you might know, I am not interested at all in any shitcoin, but I wanted to check how the XRP performed. There have been a few rumours, later denied by Grayscale, about large withdrawals in the XRP funds following the SEC action. I am trying to set up a spreadsheet with all the data, hope I will be able to complete it soon.
<...>

Today Grayscale removed XRP from their Digital Large Cap Fund, using the proceeds of the sales to rebalance the fund buying the other 4 prior components, without selecting any new coin.

Grayscale Investments®, the worlds largest digital currency asset manager and manager of Grayscale® Digital Large Cap Fund (OTCQX: GDLC) (the Fund), today announced the updated Fund Component weightings for the Fund in connection with its quarterly review.



On December 30, 2020, Genesis Global Trading, Inc., the Authorized Participant of the Fund, announced that effective January 15, 2021, at 5 p.m. ET, it would temporarily suspend trading for XRP. According to the Fund's documentation, during the Fund's quarterly review, the Manager may determine to exclude a digital asset from the Fund's portfolio even if it meets the Fund's Inclusion Criteria, including, but not limited to, if the Authorized Participant does not have the ability to trade or otherwise support such digital asset. As a result, the Fund has removed XRP from the Fund's portfolio and sold the XRP holdings to purchase additional tokens of the remaining Fund Components in proportion to their respective weightings.

This is quite interesting.
You can read the full statement here
Something I don't understand is why they delisted only the XRP inside the Grayscale Digital Large Cap Fund and not their flagship XRP fund.

[fillippone]

Even if they have closed subscription Grayscale is getting bigger and bigger:




23 billions of AUM is pretty impressive.
Just remember they achieved this non only with massive inflows, but also with the appreciation of BTCUSD price, as they aren't getting any inflows (their deliberate choice, remember) since Christmas' eve.

One remarkable result is that this closure to new capital didn't put excessive pressure on the Premium: notwithstanding the huge inflows just before the share sales stop, and the ballooning market price, we see the premium rising only moderately:

[fillippone]

Grayscale has reopened (most of) its funds again for investors:



As you can see XRP fund is still on hold for the moment.
we will see if they will start churning coins again.

[tranthidung]

Hi fil.,

I invite you to read a newest thread of mine on Grayscale: GDLC real-time observation with Trade block DLCX index.

I don't know whether Trade Block allows to download raw data for their table as I have not yet tried to do so. I don't want to create an account on Trade Block and Sign in. My AV shows warning when I visit the website but it could be a false positive warning.

[fillippone]

Finally, Grayscale is issuing new shares, inconfutabile sign they are accepting investors again:



After 11 days long hiatus, during they cashed in 627 BTC in management fees, they are again open for business.

Let’s see if they will recover the pace they had before the holidays.

Also, later during this week, they are probably going to publish their quarterly report. It will be very interesting if they decide to disclose some details about the in-kind flows, that haven’t been detailed since Q32019.

[zasad@]

https://decrypt.co/54145/grayscale-sucks-up-2000-bitcoin-on-first-day-back
"Grayscale Sucks up 2,000 Bitcoin on First Day Back
After reopening to new investors, the Grayscale Bitcoin Trust has bought 2.4 days’ worth of mined Bitcoin in just one day.

In brief
The Grayscale Bitcoin Trust has added another 2,172 Bitcoin to its reserves—worth roughly $82.5 million—in just one day.
This amounts to nearly two and a half days' worth of Bitcoin mining.
Grayscale now has over $26 billion in crypto under its management."