Grayscale Continues to Buy the Dips; Scooped Up 7x the Amount of Bitcoin Mined This Week Alone
Buying 25,000 BTC so far this week pushes Grayscale’s Bitcoin stash to 641,520 BTC.
After buying 16,240 Bitcoin on Tuesday this week, Grayscale has purchased yet another 8,760 BTC today, bringing its total Bitcoin stash to 641,520 BTC, representing more than 3.4% of Bitcoin’s circulating supply.
While Grayscale clients bought the dip on Bitcoin this week as the digital asset fell from $38,000 to $30,973 today, the same is not the case for its other products. Grayscale hasn’t bought any ETH since Dec. 9 but continues to add some Ethereum Classic (ETC), Bitcoin Cash (BCH), Litecoin (LTC), Stellar (XLM) Horizon (ZEN), and even ZEC was bought earlier this month.
Still, the premium on Grayscale Bitcoin Trust (GBTC) continues to come down to 6.28% from Dec. 22 high of 40.2%.
This premium is the difference between the price of the underlying asset BTC vs. the shares' market price.
This premium is the result of “the mkt gap btwn supply/demand. Demand for shares > supply b/c new shares are continuously created, but delayed by the 6 mth lockup,” noted Ellie Frost.
Accredited investors, which are base layer investors, “buy into the private placement of the fund” at the NAV price, which is the real price of Bitcoin. These investors can use either BTC or USD to receive these shares but once put into the trust; the Bitcoin can’t be redeemed for six months.
Once this lock-up period is over, accredited investors can sell the shares in the open market to the second layer of investors, which buys the shares at market price, which is at a premium.
The smaller investors accept the GBTC premium risk because it is IRA eligible, has tax advantages, avoids self custody, and is easy to buy with a traditional brokerage account. As for accredited investors, besides premium offering a strong incentive to enter the private placements, many investment funds have governing charters restricting direct crypto investment.
The investors taking advantage of this premium include Three Arrows Capital, the largest investors in GBTC, and BlockFi that provides a 6% return on BTC lend deposits, which they then lend to GBTC.
However, as the market matures, this premium is expected to decrease, as has already been happening with GBTC.