Institutional Demand for Bitcoin Is On The Rise: A Look At Grayscale Bitcoin Trust (GBTC)’s AUM
Bitcoin is set to have a great year in 2019. If you doubt that, you haven’t seen the data yet. Institutional investors are finally if slowly entering the market and it seems that the next bull run has already started as, at the time of this report, the price of Bitcoin was $7,800 USD.
The Block Genesis made an interesting report on the rise of institutional investors in the market. According to the site, the best indicator for how hot the market is right now is Grayscale Bitcoin Trust (GBTC). The Grayscale Bitcoin Trust is a $1.4 billion USD fund that only invests in BTC.
It is very interesting because only accredited investors are able to invest directly in the fund, they have to spend at least $50,000 USD and it only buys Bitcoin. This turns the investment into a very traditional way of investing in Bitcoin. All BTC is hold in Xapo cold storage units which charge 2% over time.
According to the estimates of the site, Grayscale has collected over $52 million USD in fees only recently. $14.9 million USD was the profit in 2017 and $27.3 million USD in 2018. 2016 had less than 10 million USD. This showcases how the fund is actually being very profitable and it is rising in usage.
The fund increases in adoption togethter with the rises in the price of BTC (which is growing right now). GBTC’s assets are increasing in price together with the token, which is profitable for investors and the company has more assets under management as time passes.
For instance, the company held 225,638 BTC, 1.3% of all the circulating supply, by the end of April. That’s a lot when you consider just how decentralized Bitcoin is. The shares of GBTC over the whole BTC market reached an all-time high in April.
It is also interesting to see how the amount of BTC that entered the company in April alone was higher than the sum of the three previous months. This shows just how much Bitcoin is trendy right now.
When you adjust the price of the BTC in USD, you can see that almost as much money was spent on buying BTC now as it was in December 2017 when the company was very bullish (which ended up bneing a sort of a mistake then as the market crashed).
You never actually buy BTC with the fund, you buy the GBTC shares. Basically, by buying these shares, you are also paying a premium on top of the service, as there are several management costs that have to be taken into account. The price is mostly decided over supply and demand, though.
As the demand for BTC increases, so does the price of GBTC because generally the demand increases together with the price of Bitcoin. If you look at the charts, you can also see that there is an increase in the demand for GBTC shares. The volumes decreased a lot since December 2017 but they are on a clear uptrend since April.
A Great Future For Bitcoin?
It is clear that the trend has been reversed and that Bitcoin is starting to get on its bullish trend again. 2018 was mostly a bearish year but 2019 seems to be a considerably more bullish one and BTC is expected to increased even more in price until the end of the year, when it may finally reach the price of $10,000 USD again.
Institutional investors are betting on Bitcoin and it looks like this time they are here to stay.