Grayscale’s Record-Breaking Q2 Sees Influx of New Investors; GBTC Inflows 118% of BTC Mined

Grayscale reported yet another record quarter with the most massive quarterly inflows at $905.8 million in Q2 2020, a quarter characterized by unprecedented global events, which is almost double the inflows recorded in Q1 2020.

This demand shows investors are increasingly looking to diversify their portfolios amid aggressive monetary and fiscal intervention resulting from the COVID-19 crisis, reads the report. And the record inflows make it difficult to ignore the “shift in sentiment towards digital assets from individual and institutional investors alike,” it said.

Both Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE) had record quarterly inflows; the latter one accounted for 15% of total inflows into the Grayscale products. ETHE was the reason demand for Grayscale products excluding Bitcoin grew to $154.7 million in 2Q20, up 35% QoQ, and up over 649% from 2Q19.

Even Grayscale Litecoin Trust saw its largest inflows to date, while the one providing exposure to Bitcoin Cash had its largest inflow since 2Q18.

Grayscale AUM
Source: Grayscale

Also, inflows into Grayscale products over six months surpassed the $1 billion thresholds for the first time ever, “demonstrating sustained demand for digital asset exposure despite a backdrop characterized by economic uncertainty.”

According to Grayscale, GBTC inflows actually exceeded newly mined bitcoin, which was cut down by 50% post-halving, a phenomenon widely circulating in the market.

Apparently, inflows into GBTC were proportional to almost 70% of all Bitcoin mined during Q2 2020, which increased to 118% after Bitcoin completed its third halving in May 2020.

The company noted that this significant reduction in the supply-side pressure might be “a positive sign for Bitcoin price appreciation.”

Grayscale BTC Flows
Source: Grayscale

However, the company still did not mention how much of these purchases were “in-kind,” which was last disclosed at “58% of total quarterly contributions in 3Q18, 71% in 2Q19, and 79% in 3Q19.”

The positive thing is that $124 million of inflows were from new investors who made up 57% of its investor base while 81% were returning institutional investors. This time these investors were more heavily weighted to offshore investors.

Overall, the majority of the investment that is 85% came from institutional investors who were dominated by hedge funds.

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Author: AnTy

Institutional Investors Are Scooping Up All the Newly Minted BTC, Leaving Not Much Left to Buy

Over the last three months, Grayscale Investments bought up to 33% of all newly minted bitcoin.

The asset manager continues to stockpile the world’s leading digital asset for its clients having added nearly 70,000 BTC to its Bitcoin Trust Fund between February to May 17, reads a researcher’s post on Reddit. The researcher noted,

“The rate of acquiring bitcoin in gbtc has actually accelerated after April. However, even at the rate of 600 bitcoins per day that GBTC has bought every day for the last 100 days, the GBTC is buying Bitcoins equal to 2/3rd of all supply of newly minted Bitcoin.”

After the halving especially, Grayscale’s bitcoin acquisition became even more aggressive. 34% of BTC added during these three months were bought in 17 days of May where the price of bitcoin remained between $8,000 to $10,000 and the digital currency experienced its third halving.

Last month, the investment fund reported a record first quarter, its Bitcoin Trust seeing quarterly inflows of $389 million.

Grayscale that provides institutional investors exposure to cryptocurrencies operates nine other crypto investment products. At the end of April, it had also bought about 50% of all the Ether minted Ether since the starting of this year.

Overall, Grayscale holds about 2% of all bitcoin and 1.1% of all Ether in circulation.

At the rate Grayscale’s BTC stash has been growing, it would accumulate 3% of the total supply by March 2021 while consuming 75% of all newly minted BTC.

At Grayscale, however, one doesn’t control their keys and all of BTC are kept with Coinbase Custody, as such, reducing the circulating supply of all BTC in the market.

The Real Flow of Bitcoin

Grayscale’s products are exchange-traded vehicles backed with cryptocurrencies, with over 90% of its inflows coming from the institutional players. While initial shares are only available to accredited investors, secondary trading is open to any investor.

Both Bitcoin and Ethereum at times trade at a high premium here, with ETHE’s premium at times surging as high as over 400%.

“GBTC demand is just institutions arbing the GBTC premium and isn’t long term capital,” argued Nic Carter, co-founder of Coin Metrics.

“The persistent premium is evidence of strong retail enthusiasm for brokerage-held BTC,” he added.

As we reported, in Q1 of 2020, Grayscale sold 29.4% of all BTC mined in the quarter. Grayscale combined with Square took in more than 50% of all new BTC minted in Q1.

This means, “there are not much bitcoins left to buy. Buyers will have to bid them out of the hands of hodlers,” said analyst PlanB.

While the exchanges can only sell existing coins, exchange and miner fees are also existing BTC as such only block subsidy that is 6.25 BTC every ten minutes since halving are the only new coins entering the market.

“I am starting to believe that miner flow is the only real flow out there, like gold. Most of btc volume is wallet reorg and trading,” he added.

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Author: AnTy

Grayscale’s Ethereum Trust (ETHE) Is Trading at a Remarkable 430% Premium, But Soon to Fade

Over the past year, we saw the premium on digital asset manager Grayscale Investments’ Bitcoin and Ethereum contracts skyrocketing. And just like those numerous other times, this time as well, the premium on Ether products has jumped as high as 430%.

Currently, the price of Ether on spot exchanges is around $170 while Grayscale’s Ethereum Trust (ETHE) is trading at $900.

In comparison, the premium on Grayscale’s Bitcoin product (GBTC) is small at nearly 9% which could be because of the “mismatch of supply and demand” in Ether AUM.

On Grayscale, the basic requirements to buy Ether are that one needs to be an accredited investor with a minimum order of $25,000 for a one-year lockup period.

For the first time, the firm reported ETHE inflows separately in its stellar quarterly report, showing that $50 million will be unlocked from the end of July-July, $75 million by the end of October, and $100 million by the end of 2020.

“In one month period June/July 2020 we’ll see $44.5M/$6M = 7.4x the current NAV of the float being unlocked. Second half of 2020 we’ll see 15x current float being unlocked,” stated analyst Cetris Paribus.

According to him, the ongoing high premium on Ether should be down “substantially” by September, unless there is a euphoric bull run.

Hedge funds are not institutional investors

As we reported, in Q1 of 2020, Grayscale had record inflows. ETHE also had its record quarter ever with $8.5 million inflows in 1Q20 and $4.0 million in the past 12-months.

As per the company report, the majority of the investment in Grayscale’s products came from intestinal investors at 88%, which were dominated by hedge funds.

However, not everyone agrees with their definition of hedge funds which may be keeping too close to Wikipedia.

Source: @jdorman81

Jeff Dorman, CIO of Arca, a crypto investment management firm pointed out that the terminology “institutional investors” used for hedge funds is “misleading” and this is not about their interest rather just arbitrage.

“Hedge funds are not institutional investors. They are professional money managers. Inst inv’s are pensions, family offices, sov wealth funds, endowments. A bunch of hedge funds buying grayscale products shows that there is an arb, not interest,” said Dorman.

“Before GBTC stopped reporting it, they would habitually report 70-80% of inflows being “in-kind”, as in, spot BTC being converted into shares. strong evidence of arb rather than fresh long-term capital being deployed,” shared Nic Carter of Coin Metrics.

However, Grayscale is “great,” cleared Dorman while explaining that the fact is hedge funds don’t need GBTC or ETHE in order to get exposure. He said,

“If they want exposure, their mandates are flexible & they will buy spot/futures, which are liquid. A HF will find a way to buy any asset they want. They are only buying grayscale products for the arb.”

With the one-year holding period of some of the shares coming up, the premium is expected to correct down by a good percentage.

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Author: AnTy

Grayscale Now Holds 1.7% of All Bitcoin; Reports Record Growth in Q1 2020

In Q1 2020, which was characterized by significant volatility, Grayscale Investments saw continued demand and that too at a “record pace.” This is because “investors are tactically using drawdowns to increase their exposure to the asset class, even in a “risk-off” environment.”

Strong and sustained interest in Crypto

The new decade had a turbulent start with coronavirus pandemic induced sell-off triggering a huge drawdown in nearly all risk assets and currencies. But despite the drawdown this quarter, Grayscale continues to hit all-time highs.

For the first time, the inflows into Grayscale products over a 12-month period surpassed $1 billion, “showing strong and sustained evidence that investors are increasing their digital asset exposure at current levels.”

The digital currency manager which has over $2.2 billion in assets under management as of March 31, 2020, had its largest quarterly rise of $503.7 million in 1Q20 in its history.

Both its Bitcoin Trust and Ethereum Trust saw record quarterly inflows of $388.9 million and $110.0 million, respectively. The demand for Grayscale Products ex Bitcoin Trust also grew a whopping over 260% from last quarter.

Not just the assets under management but Grayscale’s market share also spiked to a new high.

“Grayscale’s ten funds now hold 1.2% of ALL crypto in circulation and 1.7% of bitcoin in the world,” said Barry Silber, founder, and CEO of Digital Currency Group, the parent company of Grayscale.

Source: Grayscale Q1 2020 Investment Highlights

Grayscale investors are seeing digital assets as a medium to long-term investment opportunity and using the drop in price as the way to do so at the fastest pace in its history.

Most of the company’s investors allocate into Bitcoin via Grayscale Bitcoin trust or Grayscale Digital Large Cap Fund that accounts for 80% of Bitcoin. However, now 38% of investors, up from 29% in 1Q19, have invested in multiple Grayscale products.

Other cryptos covered are Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), XRP, Stellar Lumens (XLM), Litecoin (LTC), Zcash (ZEC), and Horizen.

This demand for Grayscale Products is primarily from institutional investors at 88%. These investors are dominated by hedge funds, registering a jump of 9% from the past 12 months. New investors meanwhile accounted for $160.1 million in inflows.

Source: Grayscale Q1 2020 Investment Highlights

The new investment capital this time was more heavily weighted to offshore investors than the rough split between the U.S. and offshore investors.

Now, large capital inflows can be taken as a sign of perceived value and “potential future price momentum.” Grayscale also found that “large increases in dollar-denominated inflows relative to Grayscale AUM have historically preceded market rallies.”

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Author: AnTy

Grayscale Investments Bitcoin Trust (GBTC) Becomes The First Registered SEC Reporting Company

Grayscale Investments’ Bitcoin (BTC) Trust is now registered as a Securities and Exchange Commission (SEC) reporting firm.

In May 2015 the trust was the 1st publicly traded BTC investment channel in the over-the-counter market. In November 2019, Grayscale filled with SEC a Form 10 that allows it to make the trust available to investors having restrictions with non-regulated channels. Its Form 10 became effective automatically, sixty days from it’s filing date.

Grayscale Bitcoin Trust is the First SEC Reporting Crypto Investment Vehicle

The shares of the trust, registered under the Exchange Act of 1934, means the GBTC is the first SEC reporting crypto investment vehicle. This means it now has to send quarterly and annually reports to the SEC, also to publish any unscheduled events or changes within the corporation and to send audited statements together with other forms required to the SEC. Under its new status, it has to reduce the accredited investors’ statutory period from 12 to 6 months. The changes will have to take place 90 days after the SEC registration approval, and only if the trust meets the Securities Act’s requirements.

The Fund Was Given Private Placement Exemption from SEC in 2013

In 2013, GBTC was given a private exemption from being registered to SEC, but Grayscale decided on its own it needs to give the fund’s compliance standard a boost for investors to trust it more. This is what the Grayscale’s managing director, Michael Sonnenshein, had to say about it:

“Grayscale voluntarily pursued this designation and will continue to work within existing regulatory frameworks. Today’s announcement should signal to investors that our regulators are willing to engage with our products and our space as a whole.”

GBTC Has Been a Success in 2019

Over the last year, GBTC has been very successful, having more than $471 private placement total inflow, which is twice more than in 2018. Sonnenshein has explained before that it doesn’t want GBTC to become an ETF, even if its products are similar in structure with ETFs and are modeled after the most popular investment ones.

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Author: Oana Ularu

Bitcoin Isn’t Just a Boy’s Club, Grayscale Report Finds 47% Female Investors Think Time to Invest in BTC is Now

Grayscale Investments, the digital asset management company has released a new study to understand if women and men share common perceptions of Bitcoin.

As per this study, which is a follow up on a 2019 Bitcoin Investor Study, despite women being risk-averse, they are as much interested in Bitcoin as men and could be more so if more educational resources are made available to them.

The survey involves 1,100 US investors between the ages of 25 and 64 with a household income of at least $50,000 and personal investment of at least $10,000.

Significant Growth Opportunity

When it comes to the US economy, women are more negative about its prospects with only 46% expressed a positive view versus 57% of men. The same goes for the global economic outlook, 36% of women positive versus 43% of men.

Moreover, just about half of the women surveyed (48%) have a positive market outlook on gold in comparison to 63% of men.

In light of this attitude, one might think females would be far more apprehensive about Bitcoin than men. But it’s so not the case.

Despite the Bitcoin conversation focused on a predominantly male investor audience, women have a healthy interest in the world’s leading cryptocurrency as well.

Women are on the same footing with male investors and expected to be just as likely to see a “significant growth opportunity” in digital currencies.

43% of respondents who are interested in Bitcoin are females. Out of this, 80% are intrigued by Bitcoin’s growth potential and 93% said they would be more open to the asset class if more educational resources were available to them.

What’s driving the interest in Bitcoin?

The underlying motivation behind this investment for women is “protecting themselves and their families from hardship more than a way to get rich.”

60% of women care about financial security than building wealth in comparison to 48% of men. While only 22% of men rate themselves as less investment savvy, it’s double with women (44%).

Certain bitcoin qualities are actually more appealing to women such as they can invest small amounts in BTC and increase their investment size.

63% of women versus 56% indicated this ability to start small is a compelling reason to invest in Bitcoin. Nearly 60% of women versus 56% of men value Bitcoins liquidity, that they can access their investment and returns at any time.

Additional Education can Assuage any Concerns

Only 39% of males respondents feel a stronger sense of urgency about Bitcoin whereas a much higher, 47% females investors think the time to invest in Bitcoin is now because they believe the price will only rise.

Though there is significant interest among females about Bitcoin there is some reluctance as well.

These concerns can be assuaged by additional education. 92% of women said they are more likely to invest in BTC had a longer track record and 93% said they would be more interested if they knew more about it.

84% said they would consider BTC more if a financial advisor recommended it, 80% if it was offered by a familiar firm, or 76% if a friend invested in it.

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Author: AnTy

Grayscale Releases November Update For Its Investment Products

The best performing product on November 29 was the Grayscale Bitcoin Trust with a day change of 4.52% followed by the Grayscale Ethereum Classic Trust with an increase of 4.18%.

Grayscale Releases November Update

According to data provided by Grayscale on November 29, all their single asset products experienced gains.

The worst performing product was the Grayscale Stellar Lumens Trust that grew just 1.95%, followed by the Grayscale Litecoin Trust with a growth of only 2.67%.

Other products include the Grayscale Bitcoin Cash Trust with an increase of 3.75%, the Grayscale Ethereum Trust, that grew 3.75%, the Grayscale Horizen Trust, expanding 3.36%, the Grayscale XRP Trust, surging 2.73% and the Grayscale Zcash Trust with an appreciation of 3.75%.

A few weeks ago we wrote that back on November 19, 2018, things were looking very bad for cryptocurrencies.

Indeed, every single product provided by Grayscale was experiencing massive losses with the exception of the XRP Investment Trust that registered an increase of 3.2%.

It is worth mentioning that these losses were related to the fact that the crypto market was experiencing a capitulation. After the Bitcoin Cash (BCH) hard fork on November 15, things turned out to be very negative for Bitcoin (BTC) and all other cryptocurrencies in the market.

Grayscale is a market leader in digital currency investing with a wide range of solutions for investors in the crypto space. The company provides investing and crypto asset management for larger and traditional investors.

The solutions provided by the firm allow many interested parties in gaining exposure to this innovative and exciting market.

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Author: Carl T

Grayscale’s Crypto Assets Inflows Increased By $250 Million In Q3; Showing Strong Demand

Grayscale Bitcoin Trust released its Q3 2019 report earlier on Tuesday, October 15, 2019 showing increased interest in institutional investment in the crypto industry.

The “Digital Asset Investment Report Q3 2019” states Grayscale holds a total of $2.1 billion USD in crypto assets under management. Grayscale enjoyed a boost in AUM value despite the price of Bitcoin plummeting from $12,000 USD to $8,100 USD during the period.

‘Over $75 million USD inflows in a day’

According to the report, the crypto asset management firm’s AUM has increased by $382 million USD since the start of the year.

The Grayscale Bitcoin Trust (GBTC) product contributed to over 60% of the total inflows averaging $7.1 million USD weekly. The weekly average inflows of the rest of cryptocurrencies including Ethereum, ZCash and Ethereum Classic stands at $2.7 million USD.

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Grayscale’s AUM grew to $412 million USD in the past one year as institutional investment grows. In a statement on the massive AUM growth during the third quarter, managing director, Michael Sonnenshein, said,

“I actually think that we had a day where we raised over $75 million in a single day — which was the largest inflow we ever had in a single day.”

GBTC investments boss inflows in Q3 2019

In Q3 2019, the company witnessed huge inflows of crypto assets following a highly successful #DropGold campaign, which lured U.S investors to switch from the shiny precious metal to digital gold.

According to the report, an average of $19.6 million USD entered Grayscale’s coffers, totaling $254.9 million USD in the three months. GBTC investments remained popular through the year raising $13.2 million during Q3 2019, representing 67% of the total investments during the quarter.

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Excluding the flagship GBTC product, the company’s alternative crypto assets grew by $107 million USD during the quarter. On Monday, the Financial Industry Regulatory Authority (FINRA) approved the trading of Grayscale Digital Large Cap Fund (GDLCF) on OTC markets in the U.S.

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Institutional investment is growing

Over 84% of investment in Q3 came from institutional investors including legacy finance and crypto related hedge funds. However, a large number of investors are not native to the crypto field as Sonnenshein explained,

“Most of our institutional investors are actually not crypto hedge fund. It really runs the gamut — we have tons of global macros funds who maybe look at digital assets as a way to be short fiat money or thinking about all the economic and political turmoil going on globally.”

Images sourced from Grayscale Digital Asset Investment report Q3 2019: https://grayscale.co/insights/grayscale-q3-2019-digital-asset-investment-report/

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Author: Lujan Odera