Cathie Wood has added to her bitcoin holdings with another purchase of shares in the Grayscale Bitcoin Trust after the cryptocurrency fell below $30,000 on Tuesday for the first time in almost a month, according to data from her ARK Invest fund.
Wood’s ARK Next Generation Internet fund bought 140,157 shares in the Grayscale Bitcoin Trust.
She’s a self-proclaimed cryptocurrency fan. Her funds hold stakes in crypto exchange Coinbase and payments company Square, which in turn owns a sizeable amount of bitcoin on its balance sheet.
As of Tuesday, ARK’s holdings in Grayscale’s bitcoin trust reached 8.986 million shares.
Grayscale’s trust is the world’s largest bitcoin investment vehicle. It gives investors exposure to the price of bitcoin without having to buy or store it.
Bitcoin reached a five-week low of around $29,400 on Tuesday. Bitcoin has been trading up 5.74% in the last 24 hours. Since hitting an all-time high in April near $64,000, it’s fallen by more than 50%, but is still up by more than 220% compared with last year.
ARK also purchased another 18,735 shares in Coinbase via its ARK Fintech Innovation Fund, according to the company’s website.
Wood is hosting the “B Word” cryptocurrency conference later on Wednesday. It will feature the likes of crypto-influencers like Elon Musk, CEO of Tesla and Jack Dorsey, CEO of Twitter.
A swath of shares in Grayscale Bitcoin Trust worth nearly 40,000 bitcoins will unlock in July in a hotly anticipated lockup expiration for the world’s largest bitcoin fund.
Due to the nature of the Grayscale Bitcoin Trust, institutional investors who buy the fund directly must hold the shares for six months before selling on the secondary market.
Many lockup periods are ending in July, and with 650,000 bitcoins in the trust, roughly 5% of the fund could be sold in the span of a few weeks. With Grayscale as the largest bitcoin fund, some investors may be worried a GBTC sell-off will exert downward pressure on GBTC and bitcoin prices more generally
July 17 is one of the largest days of the unlock period, with 16,240 bitcoin worth of GBTC becoming available to trade, according to Bybt.com.
Here’s 4 crypto experts on how the unlock will affect the bitcoin market.
Researchers from Kraken Intelligence noted that the lockup expiration could potentially provide upside pressure on GBTC prices and on bitcoin.
“Large institutions make up a sizable proportion of the GBTC owners who’ll have their shares unlocked this month. As most likely bought to profit from the Grayscale Premium – the once-hefty, and lucrative, disparity between the fund’s net asset value and spot price – they also likely shorted bitcoin in the spot and futures market so as not to be inadvertently impacted by price volatility,” the researchers said.
If institutions decide to unwind their positions, they will have to buy bitcoin from the spot market to cover the GBTC. This could potentially result in the unlocking giving a boost to bitcoin, Kraken said.
In June, JPMorgan noted that the GBTC share sale is a “headwind” for bitcoin.
“As a reminder to our readers, last December and last January had seen the highest monthly inflows into GBTC, of $2bn and $1.7bn, respectively, reflecting to a significant extent GBTC premium monetization trades by hedge funds and other investors. As the six-month lock up period expires in June and July these investors are likely to sell at least some of their GBTC shares, exerting downward pressure on GBTC prices and on bitcoin markets more generally,” JPMorgan said.
William Quigley, Tether co-founder
The co-founder of one the world’s largest stablecoins told Insider there may not be an immediate sell-off on the expiration dates because some of the institutions that bought into GBTC six months ago are now “underwater.”
“Some of them will certainly hold off selling immediately to avoid realizing a loss,” he said.
Quigley also noted that the Grayscale’s declining discount to net asset value (NAV) may indicate there’s less institutional demand for the once highly-sought after product. He doesn’t see this as an indication of waning institutional interest in bitcoin, but instead a sign institutions are acquiring bitcoin in other ways, like through Canadian ETFs.
Ryan Todd, The Block Crypto
Ryan Todd, a research analyst at The Block Crypto told Insider that the market may simply be on high alert for negative catalysts in the cryptocurrency market.
“I think the lockup is more of something to point to in the market doldrums of summer and post a 50%+ correction from bitcoin’s market top,” he said.
He added that with the declining discount to NAV, many investors may not sell their GTBC shares when the lockup expires. Investors may potentially need to buy more bitcoin, in fact.
“There’s even an argument to be made that some investors that targeted market-neutral trading strategies to harvest the GBTC premium by borrowing bitcoin and sending it to the trust 6 months ago will now have to buy back physical bitcoin in order to pay back the borrowed bitcoin,” said Todd.
The surge in bitcoin and ether over the past year has helped push Grayscale’s estimated revenue from just two funds it manages to about $1 billion, the same amount Vanguard generates from its entire suite of 82 ETFs, according to a report from ETF.com.
The Grayscale Bitcoin Trust, a semi-closed-end fund that charges a 2% annual fee, generates $756 million in estimated revenue on its $36 billion in assets under management.
When you add in the estimated revenue generated from the Grayscale Ethereum Trust’s 2.5% annual fee and its $10 billion in assets under management, Grayscale’s two funds generate about $1 billion in annual revenue.
“For Grayscale to generate close to a $1 billion from just two products – the amount Vanguard takes in from all 82 of its ETFs – is truly impressive,” ETF.com analyst Sumit Roy said.
Besides the big rally in crypto over the past year, Grayscale benefited from being the only game in town in terms of offering investors the ability to easily add crypto exposure into their brokerage portfolios without having to directly buy bitcoin with a digital wallet.
That years-long exclusivity gave Grayscale the ability to charge a hefty fee relative to most funds and ETFs.
But Grayscale’s dominance in the bitcoin space could see pressure in the coming months as competition increases. Already, the Osprey Bitcoin Trust undercuts Grayscale’s fee by 1.50%, and the SEC is reviewing the approval of several bitcoin ETFs, which could open the floodgates for investors looking too easily add or remove bitcoin from their investment portfolios.
If the SEC does approve one or many of the pending bitcoin ETF applications, it would likely be both cheaper and easier to access for investors relative to the over the counter crypto trust products from Grayscale and Osprey, as the ETFs would be listed on an exchange rather than on the OTC.
But with Grayscale’s multi-year headstart, it could take a long time for asset management companies to chip away at its success.
Grayscale Investments said in a blog post Monday it’s “100% committed” to converting its flagship Grayscale Bitcoin Trust into an exchange traded fund.
The world’s largest digital asset manager confirmed its intent to re-apply with the US SEC to offer an ETF after previous failed attempts to win approval.
“First and foremost we wish to make clear: we are 100% committed to converting GBTC into an ETF,” Grayscale said.
The Grayscale Bitcoin Trust was launched in 2013 and has been the go-to option for investors who want to add bitcoin exposure to their portfolio without directly buying the digital asset.
In the blog post, the investment company said that it always intended for its fund to become an exchange-traded fund when permissible. Grayscale first submitted an application for a bitcoin ETF in 2016 but ultimately withdrew iy because it determined the regulatory environment wouldn’t allow for a bitcoin ETF.
“While several firms have submitted Bitcoin ETF applications in the form of an S-1 or 19b-4 to the SEC, we are confident in our current positioning and engagement with the SEC,” Grayscale said. “Today, we remain committed to converting GBTC into an ETF although the timing will be driven by the regulatory environment.”
Grayscale also said that the management fee of the GBTC fund will be “reduced accordingly” when the trust is converted to an ETF.
According to Fundstrat‘s lead digital asset strategist David Grider, the plan to convert the fund should relieve recent selling pressure on GBTC shares and will re-energize demand from bitcoin investors who are willing to contribute to the GBTC trust again.
“We think this is a very positive move for Grayscale to maintain its position as a leader as the largest listed Bitcoin product and this announcement should help close the negative premium gap,” Grider said in an email.