The Capital
Published in

The Capital

Altcoin Analysis: Grayscale Indicators Talk About Growth Institutional Investors In Bitcoin

May 14, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

The Grayscale Bitcoin Trust (GBTC), which invests exclusively in Bitcoin and has increased its assets amid the current appreciation of the exchange rate to $1.4 billion, can serve as one of the most reliable indicators of demand for leading cryptocurrency from institutional investors. As noted by The Block, fund data indicate an increase in this demand.Only qualified, accredited investors can directly invest in GBTC. The minimum limit on the amount of the investment is $50,000. According to the company’s statements, in 2018 66% of the funds it received came from institutional investors, 14% from accredited investors.

According to analysts, Grayscale earned $52 million on GBTC commissions over the past three years: $14.9 million in 2017 and $27.3 million in 2018.

Along with the rise in Bitcoin, the cost of GBTC has also increased — by 124% since the beginning of February.

The assets managed by GBTC, in this case, the value of all the Bitcoins in its possession, reached a ten-month high of $1.42 billion on Friday.

As of the end of April, Grayscale held 225,638 Bitcoins, or about 1.3% of the total turnover volume of a cryptocurrency.

The share of Bitcoins at the disposal of Grayscale, in April, reached a historic high.

The Bitcoin inflow rate into the GBTC fund also reached record levels in April, indicating an increase in institutional demand. The total of 11,236 BTC received during this month is approximately equal to the combined value for the four preceding months.

If you calculate this figure into dollars, you get $58.2 million, that is a little less than the historical maximum of $60.8 million, recorded at the peak of the bull market in December 2017.

Also noteworthy is the ratio of the GBTC price to net worth.

GBTC shares are trading above this value, that is, investors are forced to overpay as to what they would give directly when buying Bitcoin. This is due to the fact that the price of GBTC is determined by supply and demand, and most investors prefer to hold security rather than a cryptocurrency.

Thus, the growth of overpayment indicates an increase in demand for GBTC, and accordingly, the interest of institutional investors. The overpayment value exceeded 100% in May and August 2017, and now it is about 40%. This level was achieved as a result of the growth rate, which has continued since December last year, which in turn indicates a change in market sentiment.

A similar trend can be seen in the GBTC monthly trading volume. Although the May figure is still significantly below the levels observed in early 2018, there is a noticeable change in trend over the past months.

Also today a Grayscale report for the first quarter of the current year was published, confirming the observations of analysts. The inflow of assets to the company’s products relative to the previous quarter grew by more than 40%, from $30.1 million in the fourth quarter to $42.7 million in the first. It is noteworthy that 99% of these funds were invested in GBTC, while last year, Grayscale Bitcoin Trust accounted for 76% of the total investment.

In addition, there have been changes in the profile of investors. If in the fourth quarter hedge funds invested less than $1 million, in the first quarter it was $24 million. The share of accredited investors dropped from 7% to 1% compared to the previous 12 months, and now family-owned firms manage 10%.

On May 10, the head of Grayscale Barry Silbert drew attention to the fact that GBTC shares on that day turned out to be the most sought-after investment product on the OTCQX over-the-counter platform.

Author: Marko Vidrih

Charts credit: The Block



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Marko Vidrih

Marko Vidrih

Most writers waste tremendous words to say nothing. I’m not one of them.