Grayscale Parent DCG Buying $250 Million Worth of GBTC
updated on:11 Mar 2021
Investment firm Digital Currency Group (DCG) plans to buy up to $250 million of shares in the Grayscale Bitcoin Trust (GBTC), according to a press release. The trust is run by digital asset manager Grayscale Investments, which is itself owned by DCG.
DCG will be using its own cash to purchase the shares, gaining indirect exposure to the price of Bitcoin. Each GBTC share corresponds to a small amount of Bitcoin, but the shares can trade above or below the value of the underlying asset.
DCG has a long track record of investing in companies across the cryptocurrency space, including Bitcoin firm Blockstream, blockchain analytics company Chainalysis and crypto exchange Coinbase. It has not previously announced any direct investments in cryptocurrencies or funds tracking crypto prices.
To a degree, DCG is jumping on a trend of companies investing their cash holdings into Bitcoin—although it's not holding Bitcoin directly. Cloud service provider MicroStrategy kicked off this trend last year and now owns 91,064 Bitcoin, worth $5 billion. Payments company Square and car maker Tesla have also followed suit, buying $120 million and $1.5 billion of Bitcoin respectively.The boost to Grayscale's Bitcoin Trust comes at an opportune time. With the recent addition of alternative Bitcoin investment vehicles, new investment in GBTC has largely slowed to a halt since late January, according to crypto data provider CryptoQuant. At the same time, Grayscale's premium—the difference between the price of GBTC shares and the underlying Bitcoin value, known as the NAV—has turned negative. It's currently at -8%.
The negative premium may have an impact on the crypto investment market. The premium led to an arbitrage opportunity between the value of buying GBTC shares and selling them (six months later, after the lock-up period expires) at a premium.
This was commonly done by hedge funds, according to investor Raoul Pal, and Bitcoin lending firm BlockFi. The lack of arbitrage will see crypto investment firms looking for alternative ways to secure returns on their investments.
Share this Blog with your friends
Bitcoin 'Doesn’t Fulfill Basic Properties of Money': ECB Board Member
updated on:10 Apr 2021
Isabel Schnabel, Member of the Executive Board of the European Central Bank (ECB), has described Bit
Bitcoin ETF Approval Will Happen: Morgan Creek’s Mark Yusko
updated on:9 Apr 2021
Morgan Creek Capital Management CEO Mark Yusko has expressed his confidence that a Bitcoin ETF will
Ukrainian Officials Own $2.67 Billion in Bitcoin: Report
updated on:9 Apr 2021
Civil servants and officials in Ukraine are holding a significant amount of Bitcoin (BTC) and other
JP Morgan's Jaime Dimon: Bitcoin Regulation a ‘Serious Emerging Issue’
updated on:8 Apr 2021
The legal and regulatory status of Bitcoin and other cryptocurrencies is something that needs to be
Bitcoin Toys With $60k, BNB Hits All-Time High and Ethereum Creeps Past $2,000
updated on:3 Apr 2021
It’s all systems go for the crypto market. Binance Coin hit a new all-time high of $3