Institutional layout of investing in digital assets

Every year there are things with good market conditions, such as liquor from the previous year, liquor from last year, liquor from this year, liquor from next year- liquor, eternal god; Bitcoin, often super god .

In the past 10 years, the price of Bitcoin has increased by 12 million times.

Beginning in September last year, Bitcoin ushered in a bull market, rising all the way from $9,000 to a record high of $41,950 . As of press time, the currency price fell back to around $35,000. Bitcoin's recent gains have driven the overall growth of the industry. On January 7, the total market value of encrypted assets crossed the $1 trillion threshold for the first time .

There are probably several reasons for this market.

First of all, in the context of the global epidemic, the economies of most countries around the world have clearly declined, the Fed has unlimited quantitative easing, and investors have begun to turn to safe-haven assets. As a decentralized payment system based on the blockchain network, the total number of tokens in Bitcoin is limited to 21 million, which is absolutely scarce and has become an investment choice for investors.

Secondly, as a private currency, Bitcoin currently lacks effective supervision, and speculation and speculation have also become a factor that promotes the rise of currency prices .( Data source: OKLink)But overall, the Bitcoin bull market is mainly attributed to the entry of institutional investors and high-net-worth investors . From Gray to Paypal, from micro strategy to Fidelity investment, from Square to Galaxy Digital, institutional and corporate investors continue to purchase crypto assets such as Bitcoin, which is a disguised lock-in, but also stimulates retail investors to convert Bitcoin The market pushed to a high point.These institutional investors have injected new impetus into the Bitcoin market and the digital asset market. Taking this opportunity, OKLink has launched a series of articles on the "Institutional Layout of Investing in Digital Assets" to take stock of the "chess players" behind the digital asset market.

Barry Hilbert-the man behind grayscaleTrust grayscale ( Grayscale ) is an "institutional investor" in the pioneer. And everything starts with its founder , Barry Silbert .

Hilbert is an amazing man. He started investing in Bitcoin in 12 years, and also invested in institutions such as Coinbase, Ripple, and Bitpay in 13 years. Now he has become a crypto giant.In 2004, he founded SecondMarket, a private equity trading platform. In 13 years, he was behind the scenes and promoted SecondMarket to establish two institutions-Grayscale and Genesis Trading's embryonic department . In 2015, SecondMarket was acquired by Nasdaq and retained the business related to crypto assets. After that, Barry Silbert integrated these two businesses and personal investment business, and established the famous DCG (Digital Currency Group) in the industry .After the establishment of DCG, it has developed rapidly. Now there are 5 subsidiaries of Grayscale, Genesis, Coindesk, Foundry, and Luno . Chain related companies.

How many crypto assets does Grayscale hold?

Grayscale Trust currently holds a total of 10 trust funds and 9 single-asset trust products , corresponding to 9 digital assets such as Bitcoin and Ethereum. There is also a digital large-cap fund , which contains 4 digital assets, which are weighted according to market value. The proportions are Bitcoin (81.63%), Ethereum (15.86%), Bitcoin Cash (1.08%), and Litecoin (1.43%).

As of press date, leaving aside the assets in the digital market fund, Grayscale Bitcoin Trust's holdings reached 606,776, accounting for 3.263% of the total circulation, and the Ethereum Trust holdings also had 2,935,513 holdings, accounting for 2.571% of the total circulation. , Can be called "industry brave" .

Now, Grayscale's Bitcoin and Ethereum Trust have become companies that report to the SEC , and are listed on the OTCQX, the highest-level over-the-counter market in the United States, with trading activity ranking among the top ten.

How does Grayscale Trust work?

The 10 trust funds of Grayscale Trust have basically the same operation mode. Let's take the ETH Trust as an example .

First of all, Grayscale Trust will regularly open private placements to qualified investors in the primary market . This open period is determined by Grayscale itself.During the opening period, the Ethereum Trust supports both cash and Ethereum funding methods .In the case of cash contribution, Grayscale will hand over the subscription funds to an authorized broker, Genesis, who will buy Ethereum on the spot market; investors can also directly provide physical ETH for funding. After that, Grayscale will hand over Ethereum to Coinbase Custody for custody , and then issue the corresponding Ethereum trust shares based on the number of assets subscribed for. There will be a 6-month lock-up period after the capital is invested to obtain the Ethereum trust share . At the end of the closed period, it can be freely transferred on the secondary market .It should be noted that all trusts under Grayscale currently do not have redemption clauses, they only enter and cannot exit, and they continue to lock positions. Because of this feature, the industry often compares Grayscale to an "encrypted brave" . Of course, if Grayscale has the will and obtains SEC approval in the future, there is also the possibility of redemption.(Source: https://grayscale.co/faq/)In addition , every fund in Grayscale will charge a management fee ranging from 2% to 3% , calculated on a daily basis, and paid in the form of digital assets every month. Like Ethereum, the current handling fee is 2.5%.Grayscale trust products will track the price of the underlying assets based on the TradeBlock ETX index (24-hour VWAP, a price index based on the weight of trading volume), but at present, there is a higher positive premium overall, and the lower the liquidity rate. The higher the premium .(Ethereum Trust and Ethereum Price Curve)

On the one hand, this is due to irredeemable, long closed periods and limited liquidity, leading to a situation of short supply in the secondary market, causing a long-term premium for trust shares . With the lifting of the lock-up period, some investors will choose to sell on the secondary market. As the market supply share increases, the premium will continue to decrease .

Grayscale outlookGrayscale is the pioneer of encrypted asset trust. Because of Barry Hilbert's forward-looking vision, Grayscale gained an excellent first-mover advantage.From the perspective of positions, as of the date of publication , more than 38 institutional investors have publicly held positions in Grayscale Bitcoin Trust . This includes some well-known crypto asset lending companies and hedge funds, such as BlockFi and Three Arrow Capital. The companies under the legendary Rothschild family are also on this list.

(Data source: https://fintel.io/)Looking at the scale of fund management, as of press date, the total scale of Grayscale reached 28.4 billion US dollars. Among them, Bitcoin trust is about 24.1 billion U.S. dollars, accounting for 84%, Ethereum trust is about 3.51 billion U.S. dollars, accounting for 12.3%, digital large-cap fund is 351 million U.S. dollars, and the rest are relatively small.The tuyere produced a huge siphon effect, and behind Grayscale, some chasers gradually appeared. Companies like 21Shares, 3iQ, Fidelity Investments, and Skybridge Capital have all launched Bitcoin funds . But from the current point of view, whether they are in terms of the scale of management or the liquidity of the secondary market, they are still a little behind the gray scale.