Grayscale’s bitcoin trust, GBTC, was the first regulated instrument that allowed institutional investors to invest in BTC.

A key element of the company’s growth strategy is the transformation of GBTC into an exchange-traded fund (ETF).

Who founded Grayscale?

Grayscale Investments, an American firm, was founded in 2013. It was founded by Barry Silbert, the owner of Digital Currency Group, a well-known crypto venture capital firm. It also owns the Genesis Global Trading lending platform and CoinDesk media.

Grayscale launched its first and most well-known cryptocurrency trust, the Bitcoin Investments Trust, shortly after its inception (GBTC). Accredited investors may purchase shares of the trust. Later, FINRA approved GBTC for trading, and it was listed on the regulated over-the-counter platform OTCQX.

What is trust?

A trust is a legal structure to which various assets can be added to the balance sheet. Money, business shares, securities, property, and even crypto-assets can be added to trusts.

Trust shares can be traded on the stock or over-the-counter markets. The peculiarity is that their buyer actually invests in the underlying asset, albeit indirectly.

Who invests trusts in Grayscale and why?

Crypto-trusts are frequently sold at a “premium” to the underlying asset’s spot price, and Grayscale also charges a 2% management fee; it makes sense for Grayscale to invest in these products only for the long term and for large investors. However, this product solves one major issue for them: the legal one.

The legal nature of the investment object is the fundamental requirement for professional financial participants. As a result, in the absence of the necessary legal framework, Grayscale products have become the first way for institutional investors to invest passively in cryptocurrencies.

Furthermore, cryptotrusts have some additional benefits. They enable the investor, in particular, to avoid the issue of secure storage of large amounts of cryptocurrencies. Furthermore, when Grayscale trusts were introduced, there were no clear rules governing the taxation of digital assets in the United States, whereas GBTC and similar products are traditional assets with a well-defined tax payment scheme.

In 2022, retail investors using the Robinhood app will be able to trade Grayscale investment products.

What is the price of trusts in Grayscale?

Each Grayscale trust share is backed by a certain amount of the underlying asset — cryptocurrency — but their prices vary.

The “Grayscale premium” phenomenon is well-known in the crypto industry, where a trust trades on crypto exchanges at a markup to the price of the underlying asset and is still in demand. This pattern reflects sentiment among institutional investors.

If “whales” are willing to pay a premium for trust, it indicates that the cryptocurrency market is bullish.

When Grayscale trust trades at a discount to the underlying asset’s price, it indicates that a bearish trend is in effect.

What cryptocurrencies are Grayscale trusts for?

Grayscale Investments’ first and most popular product is the GBTC bitcoin trust. As of May 2022, the company manages similar products based on a number of other crypto-assets, including:

How much were invested in Grayscale products?

Grayscale acquires the underlying asset for its trusts based on demand and the amount of capital invested in them. Grayscale’s Assets under management (AUM) has not only grown alongside the crypto market, but has surpassed it in terms of momentum.

In the spring of 2021, AUM was slightly more than $1 billion in April 2019, but only two years later, it surpassed $50 billion. By May 2022, due to the correction in the cryptocurrency market, the AUM value fell to around $26 billion. GBTC accounts for more than $18.7 billion of this total.

Grayscale Investments has become the world’s largest known holder of bitcoin due to the popularity of the first cryptocurrency among institutional investors. In May 2022, the company owned nearly 655,000 BTC, according to the Bitcoin Treasuries website.

Which other investment products does Grayscale have?

In addition to trusts for individual digital currencies, Grayscale offers funds with underlying assets from a basket of cryptocurrencies:

Grayscale Future of Finance (GFOF), Grayscale’s first exchange-traded fund (ETF), was also launched in February 2022. Its underlying assets consist of shares in over 20 publicly traded cryptocurrency companies. It is a stock that is traded on the New York Stock Exchange (NYSE).

Grayscale then launched the new UCITS ETF, which serves as a “shell” for GFOF.

How is Grayscale evolving?

The company sees the launch of a spot bitcoin ETF in the U. S., based on GBTC, as a critical component of its strategy. Millions of individual investors who trade on the stock exchange should be able to invest in the first cryptocurrency. According to surveys, there is a significant potential demand for such an exchange-traded fund.

However, it is unknown when this will occur. The instrument’s launch requires SEC approval, which many financial firms have been attempting unsuccessfully to obtain for their ETFs since 2018. Grayscale has already stated that it is prepared to sue the regulator if it is refused.