Grayscale Closes Private Placement in GBTC, Which Holds 3.5% of Bitcoin’s Circulating Supply

It’s been close to two weeks that Grayscale Investments, the world’s largest digital asset manager, has seen any inflows in its Bitcoin Trust (GBTC).

This is because the fund has closed any private placement for now. The message on the website reads,

“The Grayscale Bitcoin Trust private placement is offered on a periodic basis throughout the year and is currently closed.”

As of writing, GBTC has 655,360 BTC, representing just over 3.5% of Bitcoin’s circulating supply, $37.1 billion worth of total holdings.

This has been while GBTC continues to trade at a discount since late February. Much like GBTC, ETHE is also at a discount of 7%. While Grayscale Ethereum Trust is currently open, it only added 3,769 ETH this month, as per Bybt.

Grayscale’s infamous premium has provided hedge funds an opportunity to arbitrage, who deposit the coin with GBTC in exchange for shares that are worth more than the market value of BTC, and this premium is pocketed by them when they sell the marked-up shares after a six-month lock-up period. Nic Carter, of crypto-focused venture firm Castle Island Ventures, told Bloomberg,

“It became just too popular and there’s only so much demand at the end of the day by retail investors who are using Schwab or using Fidelity or a traditional brokerage.”

“Basically, too many funds plowed capital into this trade thinking it was a slam dunk, and then as that capital matured and the units in the trust became market-tradable, the demand that they expected to materialize wasn’t there from the market.”

Grayscale’s crypto products do not have a redemption program as assets are held in a trust currently; shares can only be created.

And the asset manager halts creations from time to time. “The Trust may, but will not be required to, seek regulatory approval to operate a redemption program,” states the website.

Bitcoin bull Cathie Wood of Ark Investment Management is one of the largest holders of the Trust along with Horizon Kinetics LLC and Churchill Management Corp.

This week, Digital Currency Group, the parent company of Grayscale, announced that it would be buying up to $250 million worth of GBTC shares.

As we reported, Grayscale is working on the process of becoming an exchange-traded Fund (ETF) as it hires several ETF executives.

1) buy GBTC at discount
2) convert GBTC to an ETF
3) redeem shares for spot BTC
4) profit https://t.co/9hNKMGjseT

— Jake Chervinsky (@jchervinsky) March 10, 2021

While the US has yet to approve one, Canada has already seen two ETFs that made their debut last month and saw a great response. The first Purpose Bitcoin ETF (BTCC), has amassed $464 million in assets, while another one, Evolve Fund Group’s Bitcoin ETF (ticker EBIT), has attracted $42 million so far.

In the light of the growing demand for Bitcoin products, now US ETF issuers are getting creative. Simplify US Equity Plus Bitcoin ETF (SPBC) is investing up to 15% of its assets in cryptos either “indirectly and solely” through GBTC, as per a filing. Financial Enhancement Group’s Andrew Thrasher said,

“This fund will appeal to a lot of advisors who have had an interest in getting exposure to Bitcoin or have clients asking for crypto.”

“This gives the potential to have Bitcoin exposure within a traditional custodian account in an ETF wrapper, which hasn’t been done in the U.S. due to SEC resistance to approve a pure Bitcoin ETF.”