[Update] Grayscale’s holdings increased by 16,000 Bitcoin and 190,000 Ethereum this week

Recently, Grayscale's holdings have attracted attention from both inside and outside the industry. According to data disclosed by Grayscale Managing Director Michael Sonnenshein, Grayscale's total assets under management have increased more than 200 times from December 31, 2014 to date.

Grayscale Holdings Statistics (Updated on November 6)

According to data released by Grayscale on November 5, its Bitcoin Trust holdings are worth $7.242 billion, and its Ethereum Trust holdings are worth $1.034 billion. In the past week, Grayscale Bitcoin Trust holdings increased by 16,445 BTC, and Ethereum Trust holdings increased by 195,701 ETH.

Data source: Grayscale

According to bybt data, the current price of GBTC per share in the secondary market is US$17.26, and the price per share in the primary market is US$14.08 (the price of buying an equal amount of GBTC shares BTC from the market). The GBTC secondary market has a 22.59% premium over the primary market.

Not only is GBTC currently at a premium in the market, the secondary markets of BCHG, ETHE, ETCG, and LTCN are all at a premium relative to the primary market, with the premium of LTCN being as high as 2245.22%.

Data source: bybt

Grayscale Product Introduction

Grayscale’s current products can be divided into two types: “single asset trust” and “multi-asset portfolio fund”.

There are 9 single-asset trust products in total, namely BTC, BCH, ETH, ETC, Horizen (ZEN), LTC, Stellar lumen (XLM), XRP, and ZEC.

According to data disclosed by Grayscale in the third quarter of 2020, the main users of Grayscale products are institutional investors (81%), followed by qualified investors and family offices (8% each). 57% of the users are from outside the United States.

Source: Grayscale Digital Asset Investment Report Q3 2020

There are two ways for users to participate in the Grayscale Single Asset Trust: "cash" and "physical assets (corresponding cryptocurrency)".

Through cash purchase, Grayscale will hand over the subscription funds to the authorized broker, who will buy BTC spot in the spot market and hand it over to Grayscale. After Grayscale gets the spot, it will deposit it into the custodian Coinbase Custody and issue the equivalent amount of Bitcoin trust shares GBTC to investors at the same time.

In the case of physical BTC issuance, investors hand over their cryptocurrencies to Grayscale, which deposits the Bitcoin in the custodian Coinbase Custody and issues an equal value of trust shares of GBTC to investors.

Will Grayscale create selling pressure on the market?

Grayscale Bitcoin Trust stated in the "Investment Terms" that Grayscale Bitcoin Trust does not support share redemption, which means that once you subscribe to the Bitcoin Trust, you will never be able to exchange it for Bitcoin, and you can only make a profit by selling the GBTC you hold in the secondary market. At the same time, Grayscale's "management fee" will be collected in a "currency-based" manner, which will result in a year-on-year decrease in the BTC represented by each GBTC share (Grayscale charges a 2% management fee each year).

There is a 6-month lock-up period for purchasing Grayscale Trust, which means that the Bitcoin purchased today can only be sold on the market after 6 months (due to the mechanism designed by Grayscale, GBTC can only be sold on the stock market).

Due to Grayscale’s design mechanism, its selling pressure will only occur in the secondary market, that is, the stock market.

Original image source: AICoin

According to AICoin data, Grayscale Bitcoin Trust increased its holdings of 11,534 BTC in May 2020, which means that this month (November) the stock market will face an additional selling pressure of GBTC equivalent to 11,534 BTC. However, Grayscale has increased its holdings of 16,445 BTC in the past week, exceeding the GBTC share to be released, so in the short term, this batch of unblocked GBTC will not have much impact on the market.

As of now, due to the arbitrage space in the premium of GBTC, it may further stimulate the BTC spot market, but it is still necessary to pay attention to the lifting of the lock-up period of 6 months after a large increase in holdings.

Reference Links:

1. https://twitter.com/Grayscale

2. https://www.theblockbeats.com/news/20518

3. https://www.bybt.com/zh/Grayscale