On December 16 last year, Bitcoin stood at 20,000 dollars, breaking through the highest point of nearly 20,000 dollars in the last round of bull market;
Half a month later, on the second day of the new year in 2021, Bitcoin quickly broke through $30,000;
In less than a week, Bitcoin quickly rose to $40,000.
Two years ➡️ Half a month ➡️ One week... Some people say that this is compound interest; some people say that the eternal bull market has come, and the future is a stage of accelerated growth;
The whole industry is like celebrating the new year, celebrating the stars and the sea, and imagining the bright future.
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Panic and greed index (0: extreme panic; 100: extreme greed)
For Hodler, who has experienced turmoil in the currency circle, the recent shocks may not be a big deal. After all, everyone’s cost price is generally not high, and in the past 2020, he has just experienced a drop of more than 50% in one day. But for newcomers who have just entered the bull market in this round, it is probably scary enough. I read the Weibo comment area of some big Vs, and it has been filled with all kinds of bearish views:
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Does the grayscale effect not work?
In the past two weeks, the holdings of Grayscale Fund have increased by nearly 40,000 BTC, and many people around me are asking:
Grayscale has been buying, buying, buying, why has the currency price dropped?
This is actually a misunderstanding of Grayscale by the media and many friends, thinking that Grayscale has been hoarding coins silently regardless of market fluctuations.
In the words of Shenyu, Greyscale is not bought by a single coin.
Why do you say that? Here we need to start with the grayscale mode of operation.
Grayscale is an investment company that manages cryptocurrency trust funds. Its operation model is similar to that of gold ETFs:
Different from the gold ETF, the shares of the Grayscale Fund do not support redemption, and need to be locked after being sold (GBTC lock-up period is six months); and there is no way for investors to redeem the coins charged. It can only be cashed out by selling the corresponding fund shares in the secondary market, so the currency holdings of Grayscale have shown a unilateral upward trend since its establishment.
Grayscale Fund’s cryptocurrency trust products mainly have two forms of purchase:
1) One is physical purchase
Investors directly hand over the digital currency to the Grayscale trust fund, and then exchange for trust fund shares such as GBTC.
2) The other is the purchase of funds
Investors pay cash directly to Genesis Global Trading, an OTC provider under DCG, the parent company of Grayscale. After Genesis receives fiat currency, it will convert it into digital currency at the currency price and hand it over to Grayscale, which then distributes trust fund shares to investors.
Different from the gold ETF, the shares of the Grayscale Fund do not support redemption, and need to be locked after being sold (GBTC lock-up period is six months); and there is no way for investors to redeem the coins charged. It can only be cashed out by selling the corresponding fund shares in the secondary market, so the currency holdings of Grayscale have shown a unilateral upward trend since its establishment.
Here is an explanation of the secondary market. The cryptocurrency trust products of Grayscale Fund are launched on the secondary market trading platform. As long as investors have a US stock account, they can directly purchase through these secondary markets.
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Premium brings room for arbitrage
According to Grayscale’s official report, most investors in cryptocurrency funds come from institutional clients. In Q4 2020, institutional clients accounted for as high as 93%, and in 2020, institutional clients accounted for 87%.
2) In addition, institutions can also directly deposit funds to buy GBTC shares, and at the same time open short hedging in the futures market, and then sell them in the secondary market after GBTC is unlocked, and the futures will be short.
Since GBTC has a long-term positive premium, it forms an arbitrage space between the primary and secondary markets, attracting many institutions to carry out arbitrage activities:
The profit obtained from these two forms of arbitrage activities = GBTC premium - loan/hedging interest - Grayscale management fee, etc.
Therefore, when you see the news that Grayscale continues to increase its holdings of Bitcoin, you can basically conclude that arbitrage institutions have optimistic expectations for the GBTC premium.
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What impact will the unlocking of the fund have on the currency price?
Although Grayscale did not buy coins by itself, has the Grayscale Fund had any impact on the currency price? Will the unlocking of the fund affect the price trend?
2) From April 27th to June 29th, after six months of lockup, the unlocking began on October 27th and lasted for 9 weeks until December 29th.
2020 has several periods of consistent capital inflows:
1) From January 20th to January 27th, the lock-up period is six months, and the unlocking period is from July 20th to July 27th;
2) From April 27th to June 29th, after six months of lockup, the unlocking began on October 27th and lasted for 9 weeks until December 29th.
As can be seen from the figure below, the price of Bitcoin during the two unlocking periods has a clear upward trend.
Let’s take a look at the inflows of the Grayscale Bitcoin Trust Fund in the past few months. You can clearly find that after October 28, 2020, the inflow of large amounts of funds has increased and continued until the end of December. The corresponding unlocking period is approximately from the beginning of May to the end of June.
You can speculate, what will happen to Bitcoin when Grayscale’s large-scale unlocking comes in May and June this year? Maybe you will understand what you should do in the next few months-wait patiently, keep the coins in your hands, and dont lose your precious pie by random manipulation.
(This article does not constitute investment advice)
