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In this round of Bitcoin's rise, gray frequencies frequently appeared in people's vision. "Gray to work" has become one of the latest MEMEs in the encryption field. What is grayscale and what game is it playing? This article is suitable for beginners to read.
Grayscale is a cryptocurrency trust fund
Grayscale was founded on September 25, 2013. It is a cryptocurrency fund company and one of the earliest entrants in the crypto field. After more than 7 years of development, as of the writing of Blue Fox Notes, the BTC assets it manages ( GBTC) is worth more than 19.1 billion U.S. dollars, and ETH assets under management (ETHE) exceed 2.9 billion U.S. dollars.
(Grayscale managed encrypted asset product, Grayscale)
In addition, it also holds crypto assets such as BCH, ETC, ZEN, Zcash, and LTC.
There is a difference between buying encrypted assets from Grayscale and users buying encrypted assets directly from the exchange.
If the user purchases bitcoin directly from an encrypted exchange, it is equivalent to the user directly managing the bitcoin (if the user transfers to a personal wallet, it is fully controlled). When an ordinary user buys its Bitcoin product GBTC in Grayscale, it is an investment trust relationship. What the user buys is not Bitcoin itself, but Grayscale holds a share of Bitcoin.
It can also be seen from the above figure that the current price per share is 35.8 US dollars, which represents the share of BTC held by Grayscale, rather than BTC itself. In addition, we will also discover that in the past, users bought Bitcoin or Ethereum assets at a high premium. Why didn't users buy Bitcoin or Ethereum assets directly? Two questions are involved here: Where do Grayscale's encrypted asset investment products come from? What are the benefits of buying grayscale encrypted asset products?
Where did the gray-scale crypto asset products come from
Grayscale is a manager of encrypted assets, helping investors to manage their assets. It first raises capital from qualified investors, and the funds raised are used to purchase encrypted assets. These qualified investors are generally larger investors or institutions, who use their own funds or borrow funds from off-market to invest in grayscale. The funds invested can be legal currency or cryptocurrency (such as direct investment in Bitcoin or Ethereum). Since qualified investors can directly invest in cryptocurrencies in Grayscale, the direct purchasing power of Grayscale's BTC and ETH is not as high as people usually think.
(The amount of Bitcoin purchased by Grayscale with cash is lower than people think, SOURCE: MESSARI)
Grayscale buys these funds into encrypted assets, and then divides them into shares, thus generating Grayscale's encrypted investment products, such as GBTC and ETHE. The operation of Grayscale is mainly based on the "Rule 144 exemption" rule. With this exemption rule, Grayscale allows the encrypted asset investors (strictly qualified investor identity verification) that initially created shares to be in the lock-up period (6 or 12). Months) can be sold to the public. The lock-up period of GBTC and ETHE is revised to 6 months.
The transaction price of these encrypted asset shares is often different from the value of their underlying assets, and there may be a premium or a discount. From the chart below, historically, GBTC and ETHE assets have a higher premium. This is also an important reason for the gray scale of investment by some institutions. According to recent disclosures, "Three Arrows" holds more than $1.2 billion in Bitcoin trust positions in Grayscale, holding 36,969 BTC, which currently accounts for about 6.1% of GBTC.
(Premium of GBTC, SOURCE: YCHARTS)