The crypto asset management giant Grayscale has launched a new trust that offers investors exposure to the decentralized finance (DeFi) protocol Aave (AAVE). The crypto firm’s new product is solely invested in Aave’s native token and functions like the company’s other single-asset trusts. Aave, which launched back in 2017, aims to serve as a decentralized […]
The post Crypto Asset Management Giant Grayscale Launches New Trust for DeFi Protocol Aave appeared first on The Daily Hodl.
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The blockchain analytics firm claims Grayscale is the world's second-largest BTC entity.
Blockchain analytics platform Arkham Intelligence claims to have identified the addresses of the Grayscale Bitcoin Trust. The trust consists of more than 1,750 addresses holding a total of over $16 billion worth of Bitcoin (BTC), according to a Sept. 6 thread on X (formerly Twitter). Arkham claimed that Grayscale is “the 2nd largest BTC entity globally.”
Breaking: Arkham has identified the Grayscale Bitcoin Trust’s holdings on chain.
— Arkham (@ArkhamIntel) September 6, 2023
It is the 2nd largest BTC entity globally, holding >$16B of BTC.
Though Grayscale publicly reports balances, they have refused to identify the on-chain addresses of the trust. https://t.co/uEN4kNldpm pic.twitter.com/p9GfrthoKR
The Grayscale Bitcoin Trust holds over $16 billion in BTC. Its issuer, Grayscale, is currently battling with the U.S. Securities and Exchange Commission (SEC) as it attempts to transform the trust into an exchange-traded fund (ETF).
Members of the Bitcoin community have long speculated about where Grayscale keeps its huge stockpile of BTC. Grayscale has so far refused to provide the addresses of its wallets, citing “security concerns.” Some Twitter users have criticized Grayscale for not releasing the addresses, accusing them of carrying less Bitcoin than they claim.
A search for “Grayscale Bitcoin Trust” within Arkham on Sept. 9 revealed the following five addresses:
The first three addresses hold roughly $51 million worth of Bitcoin in total, according to Arkham. The last two hold no funds but do show transactions coming from other Grayscale Bitcoin Trust addresses, including 1L8k2SD9sdTTzdDxA19QdobLbUyKyV2RVi and 1CS1M4oVbcFnZjZ5hU5bk6vLi2Q5VSsmpX. Arkham does not provide a full list of addresses for the Grayscale entity, but it does label each Grayscale address clearly as part of the transaction history of each wallet.
Related: Vivek Ramaswamy: Grayscale win ‘clears a path’ for Bitcoin innovation
Grayscale’s entity page on Arkham shows it is carrying 627,779,000 BTC valued at over $16 billion.
This is similar to the amount claimed on Grayscale’s website, implying that it does have enough Bitcoin to satisfy withdrawals.
Arkham has often come under criticism for revealing private information about blockchain users, as some Twitter users have labeled it a “snitch-to-earn” platform. However, the platform’s CEO has argued the company is only trying to even the playing field between big institutions and smaller players who would otherwise lack information.
Grayscale GBTC Trust conversion to an ETF will unlock a potential sale of up to $18 billion in Bitcoin.
The introduction of a spot-based Bitcoin (BTC) exchange-traded fund (ETF) would make the asset more accessible to individual investors and mutual funds. What's more, unlike a futures-based Bitcoin ETF, a spot-based ETF involves actually buying BTC.
So will the approval of the first Bitcoin ETF be a bullish event? Not necessarily.
Over the years, the U.S. Securities and Exchange Commission (SEC) has rejected every Bitcoin ETF applicant, and the latest denial was issued to VanEck Bitcoin Trust on March 10, 2023.
The SEC concluded that the offer did not have a "comprehensive surveillance-sharing agreement with a regulated market of significant size related to spot Bitcoin." Regulators are hesitant to release what many believe would be a more equitable and transparent Bitcoin product.
Investors now question whether the latest bids from ARK Investment and BlackRock to launch their spot Bitcoin ETFs might be the solution to Grayscale’s Bitcoin Trust (GBTC), an investment vehicle with shares traded on the stock exchange.
Interestingly, the GBTC "premium" jumped to its best levels in months after BlackRock announced its ETF filing.
But while the potential approval of a spot Bitcoin ETF might seem bullish at first, its consequences for BTC price can be negative, at least in the short term.
First, an ETF is a form of security that holds diverse underlying investments, such as commodities, stocks and bonds. The ETF may resemble a mutual fund because its issuer pools and manages the given assets.
The most well-known example of this instrument is SPY, the ETF that tracks the S&P 500 index. State Street is in charge of managing the mutual fund's $436 billion worth of assets.
Related: Bitcoin ETF race gets hotter as ARK Invest adds surveillance agreement to application
Buying an ETF grants the investor direct ownership of the fund's contents, resulting in different tax consequences than holding futures contracts or leveraged positions. While Bitcoin spot ETFs continue to be rejected, identical products have been available for decades for bonds, global currencies, gold, Chinese equities, real estate, and oil.
The Grayscale Bitcoin Trust (GBTC), an investment fund with $18.4 billion of assets under management, is currently trading at a -30% discount versus its Bitcoin holdings. This gap between their 626,778 Bitcoins at market value and the GBTC shares trading on regular stock exchanges reached as low as -49% in December 2022.
Consequently, this discount is likely justified as the instrument lacks the tools to allow arbitrage. Grayscale's GBTC is the undisputed leader in the cryptocurrency market, despite being classified as a closed-end fund, which means that the number of available shares is limited.
Shares of GBTC are not freely created, nor do they have a redemption plan. Due to this inefficiency, there are large price differences when compared to the fund's actual Bitcoin holdings. In contrast, an ETF gives the market maker the ability to issue and redeem shares, ensuring that the premium or discount is typically small.
GBTC charges a set 2% annual administrative fee; therefore, the discount may be acceptable given that the SEC continues to reject appeals and requests from all fund managers.
On the other hand, ETFs typically trade at par with net assets, as opposed to GBTC. For example, the Purpose Bitcoin ETF (BTCC.U) held a $5.63 net asset value per share on June 27, and the shares closed at $5.65 on the Toronto Stock Exchange.
Similarly, the U.S. derivatives ProShares Bitcoin Strategy ETF (BITO)'s underlying price was $16.89 on June 28, while its shares traded at $16.89.
Essentially, an investment trust product is considerably less desirable than an ETF, and Grayscale has done little to mitigate the impact on GBTC investors thus far. However, market sentiment improved modestly after the world’s largest asset manager, BlackRock, filed to launch a Bitcoin spot price ETF.
The share price discount versus its contents will eventually trend to zero as redemptions and arbitrage opportunities arise if the SEC grants the asset manager Grayscale permission to convert its GBTC Trust to a bonafideBitcoin ETF.
In this scenario, odds are that a considerable amount of BTC could enter the market as investors will finally be able to exit their position at par.
The only question is: how much of that $18 billion will flow into other Bitcoin-related instruments or get sold on exchanges?
In any case, there's a good chance that a spot Bitcoin ETF approval will produce significant sell-pressure from Grayscale's GBTC conversion as BTC that's been locked for 3-8 years reenters the market.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
The regulator has asked Grayscale to withdraw its application for a Filecoin Trust product, saying its underlying asset "meets the definition of a security."
The United States Securities and Exchange Commission (SEC) believes Filecoin’s native FIL token is a security, crypto asset manager Grayscale Investments has revealed.
According to the May 17 announcement, Grayscale lodged an application with the regulator to launch a Filecoin Trust product on April 14, which would provide investors with indirect exposure to the underlying FIL token.
In a comment letter from SEC staff on May 16, the regulator then warned Grayscale that FIL “meets the definition of a security” under federal law and asked them to withdraw their application for the Trust product.
Grayscale stated that under its view, Filecoin is not a security and will be sending an explanation to the SEC for its reasoning.
“Grayscale does not believe that FIL is a security under the federal securities laws and intends to respond promptly to the SEC staff with an explanation of the legal basis for Grayscale’s position.”
Grayscale noted that it “cannot predict” whether or not the SEC will be persuaded into accepting its explanation, and may “seek accommodations” for the registration of the Trust. Alternatively, the investment firm warned that it may be forced to dissolve the Trust in its entirety.
Related: SEC seeks denial of Coinbase petition for imminent crypto rules
This update from the SEC marks a continuation of the watchdog’s crackdown on crypto products, which has recently come down hard on a number of U.S. crypto exchanges.
On Feb. 9 the SEC fined U.S.-based crypto exchange Kraken for “selling unregistered securities” and ordered the exchange to shut down its staking-as-a-service program.
More recently on March 22, Coinbase, the largest publicly traded crypto exchange in the U.S. received a Wells Notice — a legal document that typically precedes enforcement action — from the regulator, for “potential violations of securities laws.”
Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?
This is a developing story, and further information will be added as it becomes available.
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Almost half of surveyed fund managers plan to “add” crypto ETFs to their portfolio in 2023, while only a quarter will be increasing digital asset exposures.
Institutional interest in cryptocurrencies hasn’t budged despite the market being down 60% from the all-time highs (ATH), as a majority of asset managers stated they’re “extremely interested” in crypto themed-Exchange Traded Funds (ETFs).
On April 3, financial services firm Brown Brothers Harriman (BBH) released its 2023 Global ETF Investor Survey which polled 325 institutional investors, financial advisors, and fund managers from the United States, United Kingdom, Europe and China.
It found nearly three-quarters of institutional investors claimed they’re “extremely” or “very” interested in crypto ETFs, but the effects of crypto winter have chilled their appetite as only a quarter said they’re expecting to increase allocation to crypto ETFs over the next 12 months, a 6% fall from 2022.
The findings of our 2023 Global ETF Investor survey are out. Explore the report to learn about the shifts ETF investors are making in the face of macro and market changes, and what the last decade in ETFs can tell us about the next ten years. https://t.co/KeTeAUfz8G#ETFs pic.twitter.com/ueDlwvynNQ
— Brown Brothers Harriman (@bbh) April 3, 2023
While crypto-themed ETFs fell down the priority list for some — nearly half still plan to “add” crypto ETFs to their portfolios this year to diversify investments.
BBH explained the rise in interest for crypto ETFs is partly due to fund managers learning to stomach the inevitable volatilities in the crypto market:
“As investors adapt to volatility, they are diversifying their portfolios and adding more innovative products. Even with a tumultuous year in crypto, interest hasn’t cooled entirely.”
BBH believes a clearer crypto regulatory framework will further increase the demand for related ETF exposure as it will provide more “comfort” when doing business with the crypto sector:
“Initiatives such as the draft regulation from the EU’s Markets in Crypto Assets proposal is expected to significantly ‘derisk’ investments in crypto assets for asset managers and provide an ‘additional layer of comfort’ for fund managers to engage with crypto exchange.”
More than 40% of the respondents claimed to manage assets worth more than $1 billion and over half said to have more than a quarter of their portfolio invested in ETFs.
Related: Samsung investment arm to launch Bitcoin Futures ETF amid rising crypto interest
Among the largest crypto ETFs are ProShares Bitcoin Strategy (BITO) available on the New York Stock Exchange (NYSE) and the Bitwise 10 Crypto Index Fund (BITW). BITO was reportedly the first bitcoin-linked ETF launched in the United States, while BITW tracks the top 10 largest cryptocurrencies by market cap.
Grayscale’s Bitcoin Trust (GBTC), while not an ETF, is one of the largest digital asset investment products by market cap traded on a stock exchange with a current value of $11 billion according to Google Finance.
Not all crypto ETFs have fared well as the effects of the crypto market winter saw two Australian crypto ETFs — BetaShares Crypto Innovators ETF (CRYP) and Cosmos Global Digital Miners Access ETF (DIGA) — take the title as the worst-performing ETFs in the country.
It resulted in DIGA, along with Cosmos Purpose Ethereum Access ETF (CPET) and Cosmos Purpose Bitcoin Access ETF (CBTC) being delisted at the end of 2022.
Magazine: Crypto winter can take a toll on hodlers’ mental health
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