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.