Why Bitcoin soared in early 2021, and who is the biggest buyer?

Data shows that in the six months since Bitcoin was halved on May 13, the number of Bitcoins that Grayscale has accumulated is basically equal to its mining volume during the same period. On November 20th, Grayscale Bitcoin Trust once again increased its holdings by 10,550 BTCs, bringing its total holdings to 526,765 BTCs... It is said that 2017 is a bull market for retail investors, and 2020 is a bull market for institutions, while Grayscale Speed ​​is considered to be the biggest engine of this wave of bull market. I believe investors are familiar with the name Grayscale, but there are still many questions lingering around Grayscale: Why does Grayscale keep increasing its holdings of BTC? How can institutions use Grayscale's GBTC arbitrage? Will Grayscale crash the market?

Why does Grayscale keep accumulating Bitcoin?

According to the latest data released by Grayscale, as of November 20, excluding the lost Bitcoins, the total holdings of Grayscale’s Bitcoin trust is close to 3.4% of the BTC circulation, reaching 526,765 pieces, which continues to push BTC towards All-time high prices are moving forward. In fact, GBTC does not "timing" Bitcoin investment, but aims to track the trend of its price itself and serve its investors.

Therefore, its Bitcoin investment investment strategy is "passive", why? The source of demand for increased holdings of BTC is that arbitrage institutions continue to enter the market with large funds. After buying up the share of GBTC, Grayscale increased its holdings. But the ultimate source of demand comes from the secondary market. The extremely high premium has attracted many institutions to carry out arbitrage activities, and this situation is often more obvious during the bull market. Therefore, when Grayscale continues to increase its holdings of Bitcoin, it means that arbitrage institutions are optimistic about the GBTC premium. The non-redeemable mechanism of Grayscale Bitcoin Trust makes the holdings managed by it will become larger and larger, and the 2% management fee allows Grayscale to make a lot of money.

So, who is buying Bitcoin through Grayscale?

The encrypted asset lending company BlockFi is the largest holder of Grayscale Bitcoin Trust, holding about 24.2355 million trust shares; the second largest holding is Three Arrows Capital, which is currently one of the most active cryptocurrency hedge funds. It is worth noting that hidden in this list are the accounts of well-known private wealth management institutions or family offices, including the well-known investment company under the Rothschild family (Rothschild Investment Corp).

Since GBTC can be traded in the secondary market, its share price has long been at a premium to BTC itself.

The premium is generated when the market circulation value of each GBTC > the value of the contained Bitcoin. The reasons are: small elasticity and no substitute. The U.S. stock market lacks investment tools for Bitcoin and encrypted assets. As long as the SEC has not approved the Bitcoin ETF, GBTC basically has no competitors. The mechanism of GBTC's regular sale, non-redeemability, 6-month lock-up period that cannot be resold, and the continued optimism of the market sentiment have resulted in a higher risk premium. Two factors lead to the short supply of GBTC, resulting in a long-term premium of GBTC relative to the price of Bitcoin.

Of course, except for the institution's role in stimulating the market in the early stage. The number of retail investors who entered the market because they saw the heat of the market suddenly increased.

Because people are profit-seeking, this is an eternal truth.

The income of Bitcoin is greater and the increase is greater. Bitcoin has thus become a new investment method favored by investors. After all, the attraction of making quick money is very strong, and many people cannot resist this temptation.

In the long run, Bitcoin has increased by 20 million times within ten years. Judging from this increase alone, Bitcoin does not only have storage value like gold, but also has much higher returns.

Of course, as retail investors, we also have to be cautious about risks, because Bitcoin fluctuates quickly and greatly, just look at the "roller coaster" market in recent days.

In addition, Bitcoin is a new type of asset. Whoever enters the market early and holds more valuable coins is the "banker". Players who had a lot of bitcoins in their hands in the early days took advantage of the "Cyprus" incident to hype up a handful of bitcoins, let more retail investors enter the market, and drove up the price of bitcoins before shipping. possible.

In fact, most people invest in Bitcoin in the hope that they can make a "quick money" with the help of Bitcoin. However, making quick money means that the risks and uncertainties to be faced will also be infinitely magnified. High risk means high reward. Investment is risky, and you must be cautious when entering the market.

In the global currency competition, Bitcoin has endogenous currency properties that the fiat currency system lacks. Ultimately, Bitcoin will stand where it should.