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Grayscale Bitcoin Trust

Grayscale Bitcoin Trust (GBTC) Soars Gains 137% Amid Discount Contraction 

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In a remarkable turn of events, Grayscale’s Bitcoin Trust (GBTC) has become the talk of the cryptocurrency town as traders who seized the opportunity during its darkest days are now reaping substantial profits. The discount between GBTC’s share price and underlying Bitcoin holdings has steadily shrunk, catapulting the trust’s shares to new heights.

On Thursday’s market open, GBTC shares surged to $19.71, a remarkable 137% jump from last year’s December low of $8.29. During this time, GBTC traded at an unprecedented 50% discount compared to its Bitcoin holdings, an unparalleled price gap noted by Ycharts. GBTC outpaced Bitcoin’s gains, rising 48% from $17,800 to $26,300.

Grayscale’s Bitcoin Trust, managing a substantial $17 billion asset, offers investors a unique pathway into Bitcoin via security-backed shares. Each GBTC share symbolizes ownership of a fractional Bitcoin worth 0.00090084 of a full coin, amounting to $24.49 at market opening. Yet, owing to the trust’s structural limitations, shares have consistently traded at a discount since February 2021. GBTC’s 692 million outstanding shares collectively amounted to $13.6 billion, or $19.71 per share, falling short of the trust’s Net asset value of $23.73.

GBTC Discount Battle And Redemption Hopes

GBTC’s status as a closed-end fund restricts the easy conversion of shares into Bitcoin, leading to price discrepancies as supply and demand dynamics fluctuate. The discount widened significantly after the collapse of the cryptocurrency exchange FTX last year and a subsequent decline in digital asset prices. At its lowest point, a GBTC share represented just $16.22 worth of Bitcoin while trading at $8.29, per Grayscale’s official website.

The long-awaited redemption mechanism that could erase this discount may finally be within reach if the Securities and Exchange Commission (SEC) grants Grayscale’s request to convert GBTC into a spot Bitcoin ETF, an ambition the firm has pursued for years. Last June, Grayscale took the SEC to court after denying its initial application. Still, the recent courtroom victory that compelled the SEC to reconsider has resulted in a discount reduction of under 20%.

The discount began to shrink earlier this year during the hearings of the now-decided lawsuit, contracting from 46% to 34% on March 8 as the judges showed increasing scrutiny of the SEC. Since then, the discount has continued to narrow. With experts from Bloomberg’s ETF team, Eric Balchunas and James Seyffart, giving it a 75% chance of approval this year, the prospect of a spot Bitcoin ETF has garnered substantial optimism.

Notably, a similar trend in discount reduction was observed when BlackRock, one of the world’s largest asset managers, expressed its intentions to establish a spot Bitcoin ETF. Although the discount had widened to around 41% on June 15, it quickly reverted to 34% the following week. The cryptocurrency community now watches eagerly as GBTC inches closer to potentially closing the discount gap and revolutionizing the landscape of Bitcoin investment.

Related Reading:| Bitcoin Rally Continues: Analysts Present Bullish Predictions Amid Greyscale’s Victory

Grayscale CEO Believes SEC Leashing Crypto Hampers Its Growth

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Undoubtedly, US regulators have taken steps to safeguard bitcoin investors. But lately, a lot of red flags have been raised by neighborhood residents. There were rumors that something “huge” would be announced when the Department of Justice first said it would “announce a major, international cryptocurrency enforcement action.”

That wasn’t the case, though. Community members were incensed by the government’s action against the less well-known cryptocurrency exchange Bitzlato. In fact, some openly questioned whether the most recent event was intended to divert attention from the fact that they had no reason to suspect anything about FTX.

Grayscale CEO Highlights SEC’s Regulation Repercussions

Even established members of the group began sharing their perspectives about the matter, apart from the community. Grayscale executive Michael Sonnenshein criticized the SEC’s “one-dimensional approach of regulation by enforcement” in a letter to the Wall Street Journal.

He agreed with the claim that the SEC had been “late to the game” when it came to regulating the cryptocurrency market. The CEO of Grayscale also stated that the SEC should “certainly try” to get rid of dishonest people. However, he emphasized that it shouldn’t be done “at the expense of efforts to develop appropriate regulation.”

Outlining the effects and demonstrating how it has impeded the industry’s expansion, he remarked,

“The SEC’s inaction has prevented Bitcoin’s advancement into the US regulatory perimeter, often forcing U.S investors offshore with less protection and oversight… We are seeing the consequences of the SEC’s priorities play out in real-time—at the expense of U.S. investors.” 

Grayscale filed a lawsuit against the SEC in the middle of 2022 after it rejected its request to convert its Bitcoin trust into a spot-based Exchange Traded Fund.

Grayscale submitted documents to the SEC in October of last year in order to turn its Bitcoin Trust into an ETF. Following several extensions, the regulatory agency on Wednesday issued a rejection decision. Likewise, Grayscale’s application did not address the regulator’s concerns regarding how it would guard against market manipulation and safeguard the interests of investors and the general public.

Grayscale decided to quickly traverse legal waters when the rejection order was issued. The CEO of Grayscale, Michael Sonnenshein, announced on Twitter that a lawsuit had been filed to contest the SEC’s judgment.

Here’s Why Grayscale is Being Sued For Allegedly Mismanaging Its GBTC

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Grayscale Investments is the target of a lawsuit brought by hedge fund Fir Tree. To look into “possible mismanagement and conflicts of interest” at its $10.7 billion Bitcoin fund, it is requesting information. The information sought might be used to compel the firm to alter how its flagship Bitcoin Trust—GBTC—is managed.

According to a recent Bloomberg report,

“Fir Tree, which manages $3 billion, wants to use the information to push Grayscale to erase the discount by lowering fees and resuming redemptions, said people familiar with the hedge fund’s plans. The trust has roughly 850,000 retail investors who have been “harmed by Grayscale’s shareholder-unfriendly actions,” the firm said in the complaint.”

Grayscale’s Redemption Bar “Self-Imposed”

Grayscale’s redemption bar, which dates to 2014, was allegedly “self-imposed,” according to Fir Tree. It further stated that the trust could permit investors to withdraw their money without obstruction under the law. However, the firm has stated in regulatory filings that it is unable to provide an “ongoing redemption program.”

The hedge fund further claimed that Grayscale resisted share redemption since doing so would reduce profits. The corporation allegedly sold “an incredible number” of additional shares between 2018 and 2021, according to the lawsuit. It imposed a 2% fee, higher than its rivals, on the market value of its Bitcoin holdings rather than the lower share market price. The firm received $615.4 million in fees last year, according to Fir Tree.

Grayscale’s attempts to turn the trust into an ETF must also be stopped, according to Fir Tree. The firm has often asserted that this is the only method company can legitimately redeem shares. According to a statement sent to Bloomberg by a Grayscale spokesperson through email,

“In 2013, we launched Grayscale Bitcoin Trust (GBTC) to provide investors with access to Bitcoin, and always with the intention of converting it to an ETF when permitted by US regulators. We remain 100% committed to converting GBTC to an ETF, as we strongly believe this is the best long-term product structure for GBTC and its shareholders.”

Since late February, GBTC shares have been trading at a discount. The discount gap was as wide as 43.04% at the time of publication.

Source: Y Charts

3 reasons why Bitcoin [BTC] can rebound despite dull market conditions

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Bitcoin [BTC] underwent a swift recovery, after topping out a little below $40k. The ongoing downside price action has left the investors concerned.

The latest side-way movement of price had taken shape since the dramatic fall in May and has extended to the new quarter as well. The drop was so damaging that it ended the winning streak for the digital asset which witnessed its prices surge above $60,000 for the first time in its decade-long history.

However, this trend could potentially come to an end as institutional players could soon push the asset’s price higher. Here are three reasons why a potential uptrend could be right in the inkling:

Institutional players’ comeback

One of the major recurring narratives for Bitcoin has undoubtedly been the Institutional adoption for both 2020 and 2021. While the entry of these players boosted the price of the token, after Tesla’s latest actions, institutional adoption seems to have taken a hit considerably.

But according to a key member of the crypto-analytic platform, Santiment, the price of the king coin can potentially continue to range until mid-July this year, before the institutional players in the market drive the new BTC resistance level up to $40k. The analysis also read,

“When you are enjoying yourself in the rain [especially when you were a child]. You lose track of all time. Bitcoin price is experiencing the same thing for this month.”

June-December 2019 Resemblance

The resemblance of Bitcoin’s current price action to that of June-December 2019 is uncanny. In fact, the flagship crypto-asset had surged all the way above the $14k in the last week of June 2019. Shortly after which it spiraled down as FUD entered the market in the form of Bitcoin Cash [BCH] hard fork, the then US President Donal Trump’s take on the token among other news.

Six months later, Bitcoin slashed over half of its gains and turned down to $6.5k. As a result of the decline, the charts saw death cross formation. However, as bulls bought the dips, Bitcoin recovered and slowly formed lower highs surging briefly to $10k.

Coming down to the present scenario, the latest trend could suggest a similar profit-taking phase, and a period of FUD that was sparked by Elon Musk’s announcement, China’s clampdown on cryptocurrency activities, etc.,

Grayscale Bitcoin Trust

Many well-known cryptocurrency analysts are of the opinion that the Bitcoin market could get a lift in July from the expiration of investor restrictions on the sale of shares in the Grayscale Bitcoin Trust [GBTC], and not downward pressure as earlier reported by JPMorgan strategists.

One of the main possibilities that some market speculators see is the foray investors to the coin market to buy BTC and repay crypt loans used for the purpose of financing their original purchases of the GBTC shares. Meaning, that while selling GBTC shares does not eliminate the risks of deeper discounts that could potentially ward off capital inflow, but, this adversary can be compensated by the repurchases of the cryptocurrency in the spot market.

Along the same line, Amber Group, the digital asset service provider tweeted,

“Lots of bearish chatter around GBTC unlocks whilst conveniently ignoring that in-kind subscriptions funded by debt will ultimately translate into spot buying,”

Grayscale Total Assets Under Management Reaches $50 Billion

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Investment giant, Grayscale has reached a new milestone of $50.6 billion in cryptocurrency assets under management [AUM] on the 14th of April. The AUM figure has been quite impressive, increasing by an incredible 2,400% from a mere $2 billion at the beginning of 2020.

The Grayscale Bitcoin Trust [GBTC] continued to dominate the charts and accounted for a whopping $41.44 billion, while the Ethereum Trust [ETHE] trailed behind with $7.42 billion followed by the remaining trusts, including Litecoin trust [LTCN], Ethereum Classic Trust [ETCG], and Bitcoin Cash [BCHG], with $405.5 million, $267.4 million and $234.3 million respectively.

Grayscale has witnessed a rise in its total AUM figure by over $3 billion right after its plan to further diversify its crypto-trust offerings that involved the addition of five new tokens for their eligible accredited investors.

Grayscale Bitcoin Fund [GBTC] Vs GLD fund 

With the latest surge, the asset manager is inching closer to the largest Commodities ETF, the SPDR Gold Trust GLD which has $57.70 billion in assets. And there are certain industry experts that speculated this could happen soon. Senior Commodity Strategist, Mike McGlone, for one, believes that the firm’s Bitcoin Trust would eventually overtake the most popular gold-pegged ETF SPDR Gold Trust [GLD] in the coming days. His tweet read,

“Bitcoin Trust on Track to Surpass World’s Largest Commodity ETF – In a world going digital, we believe gold symbolizes the diminishing potential for sustained commodity-price advances, notably vs. Bitcoin. The crypto is a prime example of how advancing innovation suppresses.”

Grayscale had announced its plans of converting its main product GBTC into an ETF. Hence, if approved, this would make the platform accessible to an even wider section of investors at a much lower cost. While the SEC is yet to give a green light to such an investment offering, but if approved Grayscale would easily become the second-largest commodity ETF just behind the SPDR Gold Shares.

The world’s largest cryptocurrency has surfaced as the growing choice of market participants around the world. This, in turn, prompted North American regulators to approve a few Bitcoin ETFs. As opposed to the Bitcoin’s bull season, Gold, on the other hand, has continued its downtrend starting after the first quarter of 2020.

Miller Value Fund Files With SEC To Buy Bitcoin Via GBTC Trust Fund

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Bitcoin’s adoption is rising and several new institutions are jumping the bandwagon to reap profits out of the world’s flagship cryptocurrency. BTC Trusts have become wildly popular as it paved the way to ride the growth of the crypto markets by gaining indirect exposure to the crypto-asset.

In the latest development, the asset management fund, Miller Value Fund is all set to enter the cryptocurrency realm.

According to reports, Bill Miller’s investment trust has filed with the US Securities and Exchange Commission [SEC] seeking investment exposure to BTC indirectly by investing in the Grayscale Bitcoin Trust.

The company’s official filing, which was released this week, entailed extensive discussions on the cryptocurrency and also stated that their ‘Opportunity Trust Fund’ is getting into BTC.

The edit explained

“The Fund may seek investment exposure to BTC indirectly by investing in the Grayscale Bitcoin Trust, an entity that holds BTC. Grayscale Bitcoin Trust is a privately offered investment vehicle, the shares of which are also available over-the-counter. BTC is a digital commodity that is not issued by a government, bank, or central organization.”

The official filing also disclosed that the firm is looking for a 15% exposure via the GBTC trust fund and would stop purchasing once the said cap is reached. Noting the same, Ben Miller’s Trust further detailed,

“BTC has no physical existence beyond the record of transactions on the Blockchain. The Grayscale Bitcoin Trust invests principally in bitcoin. The Fund will not make any additional investments in the Grayscale Bitcoin Trust if, as a result of the investment, its aggregate investment in bitcoin exposure would be more than 15% of its assets at the time of investment.”

A quick primer: The Miller Value Partners has $3.5 billion in assets under management [AUM] is essentially operated by Bill Miller, a veteran investor and asset manager.

Miller has been a BTC investor for quite some time now. The news came hours before he penned down a letter touting the premier cryptocurrency as a growing investment. However, the latest announcement will be the company’s first tryst at managing a BTC portfolio for a publically traded fund.

Bitcoin’s Red-hot Rally Comes To Halt; What’s Next?

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Cryptocurrency proponents anticipated Bitcoin to reclaim its fort above $40,000. However, the crypto-asset has been facing quite a stiff resistance at this level. Despite many in the community, counting for the token to bounce back, it has now entered a consolidation phase preceding a few major dips.

So what is holding back the uptrend?

Bitcoin Under Institutional Exhaustion?

Reportedly, the momentum of flows into the $20 billion Grayscale Bitcoin Trust [GBTC] have topped up when four-week rolling averages are taken into consideration. Over the past two weeks, the fund took a plunge of more than 20% through the 22nd of January, which coincided with the significant double-digit pullback in BTC’s price.

The JPMorgan strategists led by Nikolaos Panigirtzoglou stated,

“At the moment, the institutional flow impulse behind the Grayscale Bitcoin Trust is not strong enough for Bitcoin to break out above $40,000.”

The strategists also went on to add that “risk is that momentum traders will continue to unwind BTC futures positions.” Despite the growing uncertainty, it can be safely said that Bitcoin’s latest rally is in no way similar to the 2017 mania that preceded a massive collapse.

Furthermore, data compiled by the crypto-analytics platform, Skew, revealed that the coin’s realized volatility has hit levels as high as March 2020. So what does this mean?

During bull runs such as this, price fluctuations involved with BTC are more normal. This is due to the fact that market participants often tend to cash out at different points. Hence, greater volatility in the crypto-asset’s value essentially means more the extent of the deviation from its average price something that is to be expected during the bull run.

It is also important to note that overall the volatility of Bitcoin has gone down significantly while its price and market cap risen over time. If this trend continues, it can be a much-needed respite for the investors who witnessed massive FUDs and selling spark erratic price movements.

Despite the cooling off institutional momentum, Raoul Pal, founder of Real Vision, predicted

“Feels like BTC is getting ready to climb the wall of FUD fear. Positive seasonality and a nice wedge give it a good chance to hit $50k by March.”

Grayscale’s Bitcoin Holdings Surpasses Half a Million

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Grayscale is on fire and rightly so as the platform’s BTC holdings increased more than 2x, and Assets Under Management [AUM] is up more than 4x. The institutional crypto giant Grayscale revealed that it now holds more than 500,000 BTC in its Bitcoin Trust.

This news comes after Grayscale marked this quarter for accumulating its most massive inflow of capital of which its Bitcoin Trust’s assets Under management was observed to be the fastest-growing investment products. Besides, the Managing Director at Grayscale Investments, Michael Sonnenshein recently tweeted that the team has alone accumulated more than $115 million worth of Bitcoin on the 12th of November alone.

Notifying the same, Grayscale had further revealed that it owns $8.35 billion worth of Bitcoins which represented nearly 2.7% of Bitcoin’s outstanding supply. According to the data compiled by Bybt, shares in the Grayscale Bitcoin Trust currently represent $15.62 worth of Bitcoin each, with a marker price per share of $18.86 and a premium rate of 20.74%.

Grayscale Bitcoin Trust’s Aggressive Accumulation

Bitcoin Trust which happens to be Grayscale Investments’ popular investment vehicle has remained the most widely selected investment product this year. In its most recent report for the third quarter, the total investments into the digital asset managers fund in those three months alone accounted for more than a billion dollars. Upon adding the first and the second quarters, Grayscale reached record-breaking figures.

This has, in turn, increased the share price of Grayscale Bitcoin Trust [GBTC] by an astounding 63% since the 1st of October 2020.

Launched more than seven years ago, Grayscale is a US-based crypto investment firm that is one of the largest purchasers of Bitcoin in the world. Its rise to immense popularity can be attributed to the fact that the investors were potentially buying the asset as a way of indirectly owning Bitcoin because of several reasons.

Investing in a Bitcoin Trust essentially enables individuals to gain exposure to the cryptocurrency without having to worry about how to store it, and hence conforming with the law or filing separate taxes. Additionally, Grayscale’s Trust offers its investors exposure to the crypto in a tax-friendly way since certain IRA, Roth IRA, as well as other brokerages and investor accounts, would not likely give tax breaks on Bitcoin investment but, will give them for investments of publicly traded trusts.

Bitcoin May Rally After 2nd Trillion Dollar U.S Stimulus Payments: OKEx CEO

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After an unexpected market collapse in March 2020, Donald Trump, President of the United States, signed a monumental stimulus bill worth close to $2.2 trillion. The $1200 stimulus check was sent to every individual and small business in the U.S. across the nation.

On 22 June, President Trump was asked about the 2nd round of stimulus payments and he responded in anticipation that another stimulus check was on the way. The announcement received a response from Jay Hao, CEO of OKEx Exchange, who believed that another Bitcoin price rally could be driven by the second round of stimulus.

In a recent LinkedIn post, Hao stated that during the 1st round of stimulus payments, Bitcoin ‘s valuation had jumped by 58 percent from $6,500 to $10,450, and expected a similar turn of events with the 2nd round of stimulus payments.

He added that two major aspects may come into play during this time, which include institutions and retail interest in Bitcoin. Taking Grayscale’s example, he said,

“According to the trust’s latest investment report released on June 19, its current total investment in the digital currency is $3.90 billion, of which Bitcoin shares account for 88.8% (about 369,368 BTC).”

Hao believed that Grayscale’s accumulation spree was a direct indication of the increased rate of institutional adoption of Bitcoin. Although there is no concrete evidence that Grayscale Bitcoin Trust is a publicly traded investment vehicle in the U.S. where institutions can invest in Bitcoin, Hao ‘s comment made sense.

With Federal Reserves recently revealed that banks currently had an abundance of cash, OKEx ‘s CEO suggested that further capital flow would allow retail investors to recognize Bitcoin as an alternative investment. With major banks offering extremely low-interest rates, Bitcoin appeared to be the ideal form of investment for higher ROIs.

$1200 worth BTC deposits spiked during 1st U.S Stimulus payments 

https://twitter.com/brian_armstrong/status/1250907110730170370?s=20

It is worth noting the fact that during the 1st round of stimulus checks, Brian Armstrong, CEO on Coinbase revealed a chart that identified a spike in $1200 deposits on his exchange. Binance US had also reported that users were depositing $1200 increments on the U.S division on the exchange.

Considering Bitcoin had generated such interest when the asset was involved with extreme volatility, the recent stability attained by BTC may improve upon this sentiment of people. Hao’s comment may ring true in the aspect, and another price rally for Bitcoin could possibly surface after the 2nd round of stimulus is activated across the U.S states.

Bitcoin Expected To Receive More Institutional Investors as Grayscale Investments Gets Recognized By The SEC

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Cryptocurrency companies have been making a name for themselves in the past couple of months with several achieving mainstream status. One of the biggest winners in that category has been Grayscale Bitcoin Trust, the company that launched the famous “DropGold” campaign.

Just recently, Grayscale Investments announced that it has become an SEC reporting company. This comes two months after the company had filed a Registration Statement on Form 10 with the SEC on behalf of Grayscale Bitcoin Trust [GBTC].

Since its inception, Grayscale Bitcoin Trust has grown to become the world’s largest Bitcoin investment product. The company recently released a circular that addressed the organization’s plans for the future now that it was an SEC reporting company.

GBTC claimed that its main directive is to provide Bitcoin services to users without them having to go through the hassle of managing it. This includes challenges such as storing, buying and safekeeping Bitcoin on their own.

The way GBTC works is similar to that of financial and tax advisors, one of the reasons why it was accepted by the SEC. By becoming the first digital investment vehicle to be registered with the SEC, GBTC has broadened Bitcoin’s availability to all US investors.

GBTC’s SEC addition will also allow more institutional investors to get into the Bitcoin field. The entry of institutions was earlier reduced because of the lack of credibility in the eyes of regulatory authorities. According to the Grayscale Investment report:

“While the Trust has historically published quarterly and annual reports as well as audited financial statements pursuant to the OTC Markets Alternative Reporting Standard (ARS), the Trust will now file its quarterly and annual reports as well as audited financial statements as 10-Qs and 10-Ks with the SEC, along with current reports on Form 8-K, in addition to complying with all other obligations under the Exchange Act.”

With the addition of the SEC’s structure, the trust is designed to have its share value reflect the performance of Bitcoin. The company will also have fewer expenses and other liabilities as it is “solely and passively invested in Bitcoin”. According to the report, GBTC will continue to not run the redemption program or trade on a national securities exchange.

The news was also shared by Coinbase Custody as Grayscale Investments was its client. The Brian Armstrong led company was confident that being part of the SEC was an incredible milestone for the entire digital currency market.