The mystery of Bitcoin behind Grayscale Investments

In today's rapidly developing cryptocurrency market, Grayscale Investments, as a well-known digital asset management company, has attracted widespread attention for its large investment in Bitcoin. Many people can't help but ask, why does Grayscale Investment favor Bitcoin so much? Will it choose to sell these Bitcoins in the future? This article will explore this phenomenon in depth from multiple angles, analyze the logic hidden behind Grayscale Investment's strategy, and the importance of Bitcoin in its investment portfolio.

First of all, Grayscale Investment's Bitcoin strategy stems from its deep understanding of the value of digital assets. Since its advent in 2009, Bitcoin's price has experienced drastic fluctuations, but in the long run, its value has shown a significant upward trend. According to statistics, the price of Bitcoin exceeded $20,000 in 2020 and reached a historical high of $60,000 in 2021. Grayscale Investments saw this growth potential and decided to invest its funds in Bitcoin in the hope of obtaining substantial returns in the future. In this way, Grayscale can not only diversify investment risks, but also seize the rising opportunities in the crypto market.

On the other hand, Grayscale Investment's Bitcoin investment also reflects the demand for institutional investors. In recent years, more and more institutional investors have begun to pay attention to digital assets, especially Bitcoin. According to CoinShares, institutional investors' investment in Bitcoin reached $4 billion in 2021. As a market leader, Grayscale has followed this trend and launched the Grayscale Bitcoin Trust, making it easier for institutional investors to invest in Bitcoin. This trust structure not only lowers the investment threshold, but also provides a safe way for institutions that want to invest in Bitcoin under a regulatory framework.

In addition, Grayscale's Bitcoin investment is also closely related to its judgment of the macroeconomic environment. Against the backdrop of increasing global economic uncertainty, many investors have begun to seek assets to fight inflation. Bitcoin is regarded as "digital gold" and its scarcity makes it perform well in times of inflation. Grayscale's decision makers realize that investing in Bitcoin is not only about pursuing short-term gains, but also about providing customers with a value-preserving asset during economic turmoil.

From a personal point of view, I think Grayscale Investment's layout in Bitcoin is not only a grasp of market opportunities, but also a forward-looking thinking about the future transformation of the financial system. As an emerging asset class, the technology and concepts behind Bitcoin are gradually changing people's perception of wealth and value. Grayscale Investments' strategy is in line with this trend and demonstrates a deep understanding of the future financial ecology.

In short, Grayscale Investments' huge investment in Bitcoin is based on both a keen insight into market opportunities and a rational judgment of changes in the macroeconomic environment. Although market volatility makes future sales strategies full of uncertainty, Grayscale's long-term holding philosophy and flexible adaptability will enable it to continue to maintain its leading position in the field of digital assets. As time goes by, we have reason to believe that Grayscale Investments will continue to play an important role in the Bitcoin investment arena and promote the development and maturity of the entire cryptocurrency market.

Grayscale was founded in 2013. Its founder Barry Silbert invested in Bitcoin as early as 2012, and invested in Coinbase, Bitpay, Ripple, etc. the following year. Now they have become crypto giants. Grayscale was established in the same year. In March 2015, Grayscale Bitcoin Trust was listed on OTCQX with the code GBTC, and was rated as one of the 50 best performing targets in the OTCQX market for three consecutive years after 2017. In 2020, Grayscale's development has reached a higher level, and the closed period has been reduced from 12 months to 6 months. Many investors are curious about why Grayscale invests so much in Bitcoin? Will it sell Bitcoin? Let the editor of the currency circle tell you.

 Why does Grayscale invest so much in Bitcoin?

According to Grayscale's quarterly report, as of September 30, 2020, Grayscale and its affiliate DCG Group held about 2.8% of the total GBTC, so Grayscale itself did not buy a lot of Bitcoin, and the main source of the increase in holdings was institutions.

According to Grayscale's Q3 2020 quarterly report (Grayscale Digital Asset Investment Report Q3
2020), institutional investors accounted for about 81% of Grayscale's investors, and the proportion of funds flowing in also exceeded 80%.

Institutions increased their holdings in large quantities, on the one hand, there is investment demand, and on the other hand, it is arbitrage.

GBTC is currently one of the channels that can legally and compliantly participate in Bitcoin investment. Due to the huge market demand, the price of GBTC in the secondary market is often at a premium compared to the net value. There is arbitrage space when there is a premium.

According to the information disclosed by Grayscale, hedge funds account for the majority of the funds that institutional investors flow into Grayscale products. Arbitrage strategy is one of the most common ways for hedge funds to make profits. We can roughly conclude that there should be many institutions in the market. The conclusion of arbitrage is constructed.

Because Grayscale cleverly designed a non-redeemable mechanism and isolated the listing and circulation market of GBTC shares, the primary market issuance and secondary market circulation have been separated across markets. The U.S. stock market has assumed the function of trust share transfer, and the issuance market is in the currency circle. Therefore, investors cannot sell trust shares in the currency circle, only

At the same time, since GBTC has a premium arbitrage space all year round, it also attracts arbitrageurs to bring funds to buy Bitcoin spot to subscribe for trust funds. Thus, a perfect closed loop of "selling pressure transferred to U.S. stocks, and funds brought back to the currency circle" was created. You can choose to sell in the secondary market of U.S. stocks, which is equivalent to transferring the huge selling pressure of trust holdings to U.S. stocks.

 Will Grayscale sell Bitcoin?

First, the long-term positive premium of GBTC has created an arbitrage space between the primary and secondary markets. As long as institutions maintain an optimistic expectation of the risk premium of GBTC, the holdings managed by Grayscale will become larger and larger. In addition, GBTC has a "non-redeemable" mechanism, which directly eliminates the liquidity crisis of Bitcoin sellers and does not give GBTC investors the opportunity to sell and smash the market.

Secondly, the management fee settled in currency standard will make the number of Bitcoins corresponding to each GBTC share held by investors continue to decrease. Therefore, Bitcoin will also slowly transfer to Grayscale, and in the long run Grayscale will become one of the largest Bitcoin holders in the market.

It can be seen from this that Grayscale actually controls the "power of life and death" of Bitcoin buying and selling.

If the price of Bitcoin continues to rise, the arbitrage cost of institutions will continue to rise. As the price of GBTC increases, the high premium of GBTC will continue to exist, which will lead to a short-term game between the demand for Bitcoin generated by institutional arbitrage and the amount of Bitcoin cashed out by Grayscale; Grayscale can also reduce the premium by itself to balance the supply and demand of Bitcoin and stabilize market sentiment.

If a bear market comes, Grayscale can pay to maintain the premium, continue to attract institutional arbitrage, and use the 6-month GBTC lock-up period to sell; or directly smash the price of Bitcoin to the lowest and continue to wait for a new round of bull market.

At present, as long as institutions maintain optimistic expectations for the premium of GBTC in the bull market, Grayscale has no motivation to smash the market.

In summary, this is the answer of the editor of the currency circle to the two questions of why Grayscale invests so much in Bitcoin and whether Grayscale will sell Bitcoin. I hope it can help all investors. The purpose of buying GTBC is actually to reduce the cost of asset management for investors. Investors can hold Bitcoin by directly purchasing GTBC in the U.S. stock market. This method is simple and safe enough, and the learning threshold has also become lower, and it also avoids many risks of trading Bitcoin by themselves. However, currently, institutional investors account for 80% of the purchases of GTBC, so retail investors should be cautious if they want to enter the market.

When it comes to whether Grayscale will sell Bitcoin, this question is also thought-provoking. First of all, Grayscale's investment strategy is not short-term speculation, but long-term holding. According to Grayscale's statement, their goal is to provide customers with long-term value growth. Therefore, although there may be short-term selling pressure during periods of market volatility, in the long run, Grayscale prefers to hold Bitcoin in the hope of obtaining higher returns in the future.

However, the market is always full of variables. Grayscale Investment's Bitcoin selling strategy may be affected by a variety of factors. For example, changes in regulatory policies, fluctuations in market sentiment, changes in the macroeconomic environment, etc., may prompt Grayscale to consider adjusting its Bitcoin holdings. In some cases, Grayscale may choose to sell part of its Bitcoin to realize profits or rebalance its portfolio. This flexibility allows Grayscale to remain competitive in a complex and changing market environment.

It is worth noting that Grayscale Investment's Bitcoin holdings are not just a simple holding of digital assets. Grayscale also provides value-added services to investors in a variety of ways. For example, they provide investors with regular reports, analyze the dynamics of the Bitcoin market, and provide investment advice. In addition, Grayscale also actively participates in industry exchanges and promotes the legalization and popularization of Bitcoin and other digital assets through cooperation with other institutions. This active market participation has enabled Grayscale to establish a good reputation in the industry and attract more investors.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
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Note: The above exchange logo is the official website registration link, and the text is the APP download link.