Grayscale is NOT buying 150% of newly minted BTC – here is the real deal

I’ve seen a few posts lately , about how Grayscale (owners of the GBTC – a trust that allows you to invest in Bitcoin via stonk exchanges) is now, post-halvening, buying up over 100% of the newly minted BTC each day based on their daily asset reporting via Twitter. This is not quite true.

One aside before I get into it… Grayscale requires you to lock up your investment of GBTC (aka mandated HODL) for 6 months. Buy it on June 1 – you can’t touch it until December.

If you look at their Q3 2019 Digital Asset Report you can see that, generally speaking, 80% of the “inflows” of capital were “in-kind” – in other words, they let you send them BTC (instead of USD) for shares in GBTC. Also, 84% of investors are institutional investors (primarily hedge funds).

So what’s happening? Hedge funds are sending BTC to Grayscale (certainly borrowed on margin) and then 6 months later, can cash it out (GBTC trades at a premium to BTC), pay back the margin loan, and pocket the remaining spread. Wash, rinse, repeat.

Assuming that the 80% in-kind percentage still holds (as reported in Q3 2019), the estimates of “150% of new bitcoin minted post halvening” are actually closer to 30%.

This is not to suggest that one entity sucking up 30% of new supply is a bad thing, it’s just a hell of a lot different than 150%!

Submitted June 24, 2020 at 11:24AM by BeakMeat https://ift.tt/2Yqulxg