Grayscale's Intentions for a Bitcoin ETF | MicroStrategy Acquires Additional $15 Million in Bitcoin at Average Price of ~$59,339

Top stories and news you should know in the bitcoin, crypto, and decentralized markets

High Level

  • Citing the growing interest and questions in recent months regarding the possibility of a Bitcoin ETF in the US, Grayscale made it clear in a Medium post that they are “100% committed to converting GBTC into an ETF.”

  • Since launching their Grayscale Bitcoin Trust (GBTC) in 2013, they have been pioneering the products that provide investors exposure to digital assets in the form of a security without the challenges of buying, storing, and safekeeping digital assets.

Drilling Down Deeper

As Chazz Michael Michaels in Blades of Glory says, “Nobody knows what it means, but it’s provocative… It gets the people going!”

In my previous newsletter, the main story was an imminent decision by the SEC this quarter on an ETF that tracks the performance of bitcoin. It mentioned the Grayscale Bitcoin Trust (GBTC), and I stated any decision that was not an approval would likely be positive for GBTC. Now that they have thrown their hat in the ring with other firms for a Bitcoin ETF, it looks like they can benefit from any possible outcome from the SEC’s ultimate decision.

Grayscale with GBTC became the first company to launch a publicly-traded Bitcoin fund in the U.S. and the first and only to convert a Bitcoin fund into a SEC-reporting company. The only other fund that holds the distinction of being an SEC-reporting company today is the Grayscale Ethereum Trust (ETHE). Grayscale first submitted an application for a Bitcoin ETF in 2016 and spent 2017 speaking directly with SEC about the process.

The infrastructure and regulatory environment for digital assets was not as advanced as it is today. Every day the digital asset market is developing and maturing, it is making the industry very exciting to be a part of as well as focus and track on the long-term. Although the move and timing is dependent on the regulatory environment, Grayscale remains dedicated to a methodical lifecycle for their products that starts with launching a private placement, next obtaining quotation on the secondary market, then becoming SEC reporting, and finally converting into an ETF when it is permissible.

If and when GBTC converts into an ETF, the shareholders will not need to take any actions and the management fee will be reduced accordingly. GBTC is currently the largest and most liquid Bitcoin investment product in the world with distinguishing benefits as well as a track record that has successfully positioned it with $34 Billion in AUM placing just shy of commodity exchange products like the SPDR Gold Trust (GLD) and iShares Silver Trust (SLV). If BTC shows more upside as many are suggesting that it’s still in the early stages of a monumental bull run, then GBTC is set to benefit and capture corresponding gains that also can give investors exposure to bitcoin’s success whether or not it is given the ability to convert into an ETF.

Approval of a Bitcoin ETF is largely viewed as a major catalyst inside and outside of the crypto, decentralized finance, digital asset, and investment communities. The landscape surrounding bitcoin as well as crypto assets, in general, has grown and matured considerably since the commission’s last decision and denials over three years ago. Custody, data integrity, and manipulation concerns appear to have been squashed with banks, corporations, and other financial institutions rushing into the space lately.

Seeing that GBTC shares are trading at a discount relative to its net asset value (NAV), it seems like a total layup for anyone with a brokerage or self-directed retirement account who wants exposure to bitcoin while seeking to benefit from its growth potential and possibly its eventual conversion into an ETF.

Who doesn’t love a good discount?

TL;DR; The Grayscale Bitcoin Trust (GBTC) has filed and pledged to become an ETF as well as lower its fees accordingly after historically trading at a premium to its NAV and recently seeing it turn into a discount due to rising investor expectations of an ETF for bitcoin being approved by the SEC.

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News You Should Know

Coinbase Files to Go Public via Direct Listing on April 14

This news initially broke via CNBC on April Fool’s Day, and the company has since made even more news that shocked Wall Street by releasing their 2021 Q1 earnings this week. Coinbase reported an estimated $1.8 Billion in total revenue for the first quarter of this year, which by the way was more than they did in all of 2020. They also estimated a total trading volume of $335 Billion, $223 Million in assets on their platform, 56 Million verified users, and 6.1 Million in monthly transacting users.

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Fidelity, Square, Coinbase Launch Bitcoin Trade Group

The three firms mentioned and several other financial firms are forming a new trade group that aims to shape the regulatory environment around bitcoin and other cryptocurrencies. The Crypto Council for Innovation (CCI) will lobby policy makers, take up research projects, and serve as the industry’s voice for the benefits economically and socially of bitcoin and digital currencies as well as distributed ledger and related technologies. Advocates argue that bitcoin, blockchain technology, and cryptocurrencies have the potential to create jobs and enhance as well as extend financial services, at little or no cost…

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MicroStrategy Acquires Additional $15 Million in Bitcoin at Average Price of ~$59,339

The latest purchase puts MicroStrategy’s total holdings at ~91,579 BTC. Michael Saylor announced the news on Twitter that their bitcoins were acquired for ~$2.226 Billion at an average price of ~$24,311 per bitcoin. It is a great testament to their conviction and commitment to keep acquiring more bitcoin…

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“I don’t expect an 80% downturn, I don’t think it’s a speculative asset, and I don’t think you can “take money off the table”. You know, you’re speaking like a crypto trader right now, right? Yeah, I mean maybe you’re doing it just to represent their interest, but I don’t see the world that way. I think that bitcoin is sound money. It’s the technically superior asset class compared to the dollar, the euro, the peso, the bolivar, compared to a stock index, compared to gold, compared to silver, compared to everything you can conceivably buy. It is technically thermodynamically superior as an asset. So, when you say things like that to me, and maybe you just do it just to see what I’ll say back, I just imagine you preaching to me in Argentina while you’re asking me if I’m going to sell the dollars and buy pesos back again as the peso slips from 20 to the dollar to 40 to the dollar to 80 to the dollar, or if we’re in, you know, Venezuela. I mean you think a Venezuelan company is going to like “take some money off the table” by selling their US stocks and their US dollars to buy back in to local currencies? Or then, you know, in Zimbabwe, you think they would take money off the table, right? Like the point is if you have this superior asset it’s going up forever, Laura, forever.”

— Michael Saylor (response to Laura Shin’s question on her Unchained Podcast)

Market Dashboard

Bitcoin Dominance = 55.7%
Ethereum Dominance = 12.1%
(over 9,100 cryptocurrencies)
Last Close = $56,000 (as of Apr. 7, 2021)
Market Capitalization = $1.046T
YTD Performance = +93%
Last Close = $1,971 (as of Apr. 7, 2021)
Market Capitalization = $227.414B
YTD Performance = +167%

Bitcoin at the time of this writing has pulled back over the beginning of April with it breaking its 30-day moving average with Bollinger Bands over the same time period indicating at these levels a lower band just above $50K and its upper band at $63K. Ethereum is at a bit of a fork in the road with technical indicators showing price support currently in the high $1.4K range with short-term resistance around $2.7K. Crypto assets and DeFi, in general, hit a milestone with over $100 Billion (+10M ETH) in total value locked in the decentralized finance ecosystem. Exchange data is has been showing that gold ETPs had $20B of outflows in the last two quarters and crypto ETPs had seen $7B in inflows causing many to wonder if investors are starting an exodus into bitcoin and crypto assets. The strong uptrend in bitcoin since October 2020 has carried the entire crypto asset higher, and the recent pullback has shook ether and many other cryptos harder than BTC that could be marking an end in the recent “alt season.” In a bullish report by Bloomberg this morning in their April Crypto Outlook, they said that bitcoin would approach $400,000 in 2021 based on the regression since the 2011 high depicting it is on similar ground as the roughly 55x gain in 2013 and 15x in 2017. It is making my $1M/BTC call look good by the end of the year of its next block halving event, estimated to be in May 2024.

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An investment in any asset or strategy involves a high degree of risk and there is always the possibility of loss, including the loss of principal. Nothing written above may be considered as an offer or solicitation to purchase or sell securities or other services. The trading and investing ideas and strategies discussed above are not recommendations to buy or sell any security and are not intended to provide any investment advice and/or recommendations of any kind, but are made available solely for educational and informational purposes. Before acting on information from above, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser. Data sources are from publicly available outlets and news. Figures may have changed or incorrect, please do your own research.