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Grayscale have turned #Bitcoin 
into a liquidity black hole where money goes in - and does not come out.
But how did they do it?
The "Grayscale Effect" blew my mind to learn about. Here's what it means - a thread:
into a liquidity black hole where money goes in - and does not come out. But how did they do it?
The "Grayscale Effect" blew my mind to learn about. Here's what it means - a thread:
As the first SEC reporting company that you can buy and store Bitcoin with in the US, Grayscale has a near monopoly on institutional interest. They are now one of the largest holders of BTC in the world at 649,000 Bitcoin, or over 3% of the total supply. https://bitcointreasuries.org/
As the SEC has continually rejected a Bitcoin ETF, Grayscales current position of power has only deepened. So much so actually buying BTC through them has on average cost 38% more than it should. https://ycharts.com/companies/GBTC/discount_or_premium_to_nav
The premium comes from the demand for these GBTC shares which Grayscale issues, and are sold on secondary markets like Ameritrade. Other investors through a sheer lack of other options are willing to pay the premiums. This creates a cycle:
However if you are in the private investor group at Grayscale, you can get these GBTC shares with zero premium. They deposit BTC, rather than buying it. This option is how most funds at Grayscale are raised.
So if you're part of the private group, you can borrow Bitcoin from a lending company, deposit it at grayscale, get issued GBTC shares, and immediately sell them on secondary markets for on average 38% more, paid in cash.
Through abuse of their popularity Grayscale have created an institutional investment vehicle even the staunchest of Bitcoin detractors cannot argue with, as they don't need to hold BTC to profit. Win-Win.
Secondary investors who paid this premium must wait before selling to even break even. This has created an almost complete one way system of money in, and never out.
So what should you do? Keep an eye on GBTC and ETHE premiums over at Grayscale. As long as there is a premium (currently 20% on ETH!) then this is a very bullish sign. https://ycharts.com/companies/ETHE/discount_or_premium_to_nav
If you would prefer a video breakdown of this, check out my recent video on it:
Throw me a follow if you found this insightful.
As usual though:
This. Is. Good. For. Bitcoin.
Throw me a follow if you found this insightful.
As usual though:
This. Is. Good. For. Bitcoin.
