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Grayscale: What is it?
You may have heard of Grayscale if you are interested in the cryptocurrency . Its name often comes up in the news: its role of investment funds in the management of digital assets , its multiple "trusts" and ETFs. But basically, what is Grayscale , and why does this actor arouse so much attention? This article offers you a dive into the world of Grayscale, starting from its history to its impact on the market , in order to offer you an overview of this mastodon.
Table of contents
Grayscale is what: the foundations of Grayscale, a bridge between traditional finance and crypto
A subsidiary of Digital Currency Group
Grayscale, of his full name Grayscale Investments , was born in 2013. He is part of the group Digital Currency Group (DCG), founded by Barry Silbert. DCG is itself an ecosystem of companies specializing in blockchain and technologies associated with cryptocurrencies. Grayscale is positioned as an asset manager who offers investors simplified access to Bitcoin , others at ltc Oins (alternative currencies) and various Cryptos products, without having to directly handle private keys or digital wallets.
From its beginnings, Grayscale focused on Bitcoin , then still unknown outside a handful of initiates. By offering a trust (investment vehicle close to a closed fund) indexed to the price of Bitcoin , Grayscale facilitated the entry of institutional capital into a universe hitherto dominated by technophile individuals.
Side products at the OTC market
In 2015, the Grayscale Bitcoin Trust (G BTC ) was listed on the OTCQX market in the United States. This meant that one could negotiate "shares" of this trust in a relatively accessible stock market (as opposed to the Nasdaq or Nyse). The G BTC has thus become the first Bitcoin to be exchangeable in a "public" manner within the framework of American legislation.
Very quickly, other products were born, relating to Ethereum Ethereum Litecoin Litecoin Bitcoin Cash , Ethereum Classic , etc. All follow to varying degrees the same logic: propose a derivative (a trust ) backed by cryptocurrency, allowing investors not to worry about the safety , storage or KYC implied by exchanges .
Grayscale is what: how does a trust work? The specificities of G BTC
What is a “Bitcoin Trust”?
An investment trust cryptocurrencies is a legal vehicle where a manager - Grayscale, in this case - holds Bitcoins (or other cryptos) on behalf of investors. Unlike an ETF (Exchange Traded Fund), a trust often works with a "closed wallet". This means:
- Number of fixed shares : we do not create or destroy parts of the trust according to supply and demand, unlike an ETF .
- Dark or premium : as the range of units is limited, the price of the trust on the market can move away from its net inventory value (VNI). You can end up with a premium (the share costs more than the value of the held cryptos) or a discount (the share is negotiated cheaper than the real value of the held cryptos).
- Annual costs : To cover storage, safety and management, Grayscale applies a percentage of costs (often around 2 % for the G BTC ).
The Grayscale Bitcoin Trust is historically the flagship product. At its peak, it held more than 640,000 BTC , or almost 3 % of the world supply of Bitcoin . To date, this trust remains one of the biggest individual BTC .
The question of the premium and the discount
During the first years, before the emergence of Bitcoin ETF on the (future) markets, the G BTC was most often traded with a bonus compared to the price of the BTC . For what ? Because it was almost the only regulated and stock market to expose themselves to Bitcoin , attracting high demand.
Subsequently, with the diversification of financial products (future, other trusts, appearances of competitors), G BTC began to sit down with a discount , up to 25 or 30 % less than the real value of the Bitcoins held. Investors were unhappy because it meant losing a fraction of their bet.
Grayscale is what: Grayscale's strategy on other cryptos?
The "Trusts" on the AltcOins
Grayscale is not limited to Bitcoin . Over the years, the company has launched products centered on Ethereum Ethereum Litecoin Litecoin Bitcoin Cash , ZCASH , Ethereum Classic and even XRP .
The idea is the same: each trust allows investors to buy shares representing a basket of the target cryptocurrency. For example, the Grayscale Ethereum Trust (ETHE) is indexed to the course of Ether , while the Grayscale Litecoin Trust ( LTC N) follows that of Litecoin .
The problem is identical to that of the G BTC : the shares can be negotiated with a bonus or a discount compared to the real value of ltc helds held . In addition, management fees are often high (up to 2.5 %), which can weigh on performance, especially if the discount widens in the Bear Market .
Diversification initiatives
In addition to the trusts , Grayscale offers a large CAP Fund digital (GDLC ), which brings together several major cryptocurrencies depending on their capitalization, giving investors a diversified exposure in a single product.
Again, the background is listed in OTC, which involves the same bonus/discount mechanics, and annual costs. For some institutional investors, this remains a practical tool to bet on the biggest tokens , especially if they do not want to manage several products.
Grayscale is what are the reasons for the success of Grayscale?
Simple and deemed safe access
In the world of cryptocurrencies hacking stories , unreliable exchange platforms For an institutional investor (banks, hedge funds , insurance companies), it is sometimes easier to entrust asset management to a recognized player who:
- Performs the CUSTODY (storage) of cryptos in secure digital safes.
- Fills reporting obligations to the SEC and publishes auditors accounts.
- Is already part of an influential group, the Digital Currency Group, which reassures its financial solidity.
A legitimacy acquired via the stock market
The fact that grayscale products are negotiated on an OTC market in the form of "securities" gives a legal framework familiar to players in traditional finance .
Rather than getting started on Binance , OKX or Coinbase BTC GTC shares via their usual title account, sometimes even in a retirement savings plan (IRA or 401K in the United States). This so -called "compliant" environment seduces those who want to avoid manipulating seed phrases or private keys directly.
Avant-garde marketing
Grayscale has communicated a lot on the concept of " ltc Off Zero ", encouraging investors to allocate even a small percentage of their Bitcoin or LTC Oins . This marketing approach contributed to the democratization of the idea that cryptos could constitute an active active diversification.
Grayscale is what: the drawbacks and criticisms
High costs
Many people criticize Grayscale for its costs: around 2 % per year for most trusts , which is high at the scale of a market where the guard can be less expensive if you manage it yourself. Some ETFs on conventional assets have costs less than 0.50 %. Grayscale is justified by explaining that the safety and complexity of the Custody Crypto "cost expensive".
The problem of the discount
As mentioned above, the GBTC discount BTC reach significant levels. Investors who buy when the discount is strongly rely on a reduction in this gap. However, if the conversion to ETF does not succeed, the situation can last. This means that the value of your investment can remain below what the Bitcoins held by the Trust would be worth.
Market concentration
Some deplore that an actor like Grayscale can hold up to 3 % of the total bitcoin . This gives a certain power and can potentially influence the market so grayscale decided to sell massively. Even if such a scenario remains unlikely, the idea that a single manager has such an important part of BTC arouses debates.
Grayscale is what: the new grayscale products, towards a "mini-etf"
A constant expansion strategy
In 2024, Grayscale launched several new products to continue innovating. First, a “ mini and Fitcoin spot ” supposed to offer very competitive costs (0.15 %) compared to the G BTC (1.5 %). The objective is to meet criticisms of too high costs. graycal legitimacy and security .
In parallel, Grayscale develops funds related to the theme of artificial intelligence and blockchain, considering that these two sectors could converge. We thus see that the company seeks to anticipate the trends of decentralized finance ( DEFI ) and emerging technologies.
Why talk about ETF when GBTC already exists?
The Grayscale Bitcoin Trust (G BTC ) has long been criticized for its high costs (1.5 %) and its sometimes significant discount compared to the real value of the Bitcoin held. But since January 2024, G BTC has been officially converted into a Bitcoin Spot ETF , validated by the SEC. This means that it now works as a classic ETF, with creation and destruction of shares according to demand, which greatly reduces the differences between the market price and the net inventory value (VNI).
The arrival of this "new" GBTC in the form of ETF makes it more transparent, more liquid, and more attractive for institutional and individual investors. In parallel, Grayscale also explores even more accessible formats, such as a mini-ETF, to meet the needs of various investor profiles.
Grayscale is what: the Alameda, FTX and the involvement in G BTC
It is interesting to note that actors like Alameda Research (the Trading of FTX ) used the G BTC to make arbitrations. Alameda bought or sold shares of G BTC to take advantage of the gap (premium or discount) with the course of bitcoin . When FTX and Alameda went bankrupt, Alameda Research still held shares of G BTC .
After bankruptcy, the new team in charge of Alameda sought to recover the theoretical value of underlying Bitcoins They would have attacked Grayscale to claim that the manager artificially maintains the structure of Trust rather than transforming it into ETF , which would close the discount . This file illustrates how the very structure of Grayscale can cause conflicts of interest in certain critical situations.
Grayscale is what: what grayscale impact does it exercise on the market?
Whale's effect: Grayscale as a bitcoin whale
With more than 600,000 BTC (at certain times), Grayscale is what is called a "Whale" (whale): an actor capable of influencing supply and demand on a market where rarity is a key factor. If Grayscale decided to liquidate a notable fraction of his BTC , the course could feel. Conversely, its massive acquisitions contributed to propeling the price of Bitcoin to new heights during the bullish phases.
The issue of the narrative and the "legitimization" of the cryptos
For some managers, of traditional finance, the fact that a company like Grayscale is recognized by the SEC as a "sec-reporting company" (that is to say that it regularly publishes official financial reports such as form 10-q or 10-k) brings a form of legitimacy to bitcoin and cryptocurrencies . Grayscale therefore plays a gateway, showcase, showing institutional actors that the crypto sector is ripe for wider adoption. His marketing (advertising campaigns such as the famous tagline " Drop Gold, Buy Bitcoin ") also influenced general perception.
Advantages and disadvantages of investing via Grayscale for a large background
The advantages of going through Grayscale for a large background
- No technical management : you don't have to handle a private key or secure a portfolio. Everything is delegated to the investment fund .
- Clear legal framework : The company is registered and monitored by the SEC , at least for its declarations, reducing (theoretically) the risks of scam or non -monitored bankruptcy.
- A side product : you can sell or buy via a traditional broker, sometimes even in advantageous savings or retirement accounts.
The limits to be taken into account
- Annual fees : 2 % or more for some trusts are not negligible, especially if you plan to keep your shares for several years.
- The Spread between the real value and the price of the trust : you can be trapped by a discount if you buy too early or if the market turns.
- No use of the crypto BTC actions does not equivalent to having bitcoin on a wallet. You cannot send this bitcoin to another account, nor use it in decentralized finance .
If your objective is purely speculative or financial (betting on the increase in crypto ), Grayscale remains a practical tool, especially for an institutional investor under regulatory constraints. But if you are looking to experience the dApp S , the DEFI Blockchain ecosystem actively, it is clearly not the solution.
Conclusion: Grayscale, a pivot actor of the crypto ecosystem
To summarize, understand what Grayscale is to enter several key elements:
- Grayscale is an asset manager dedicated to cryptocurrencies , in the form of trusts and ETFs on an OTC market.
- He is at the origin of the Grayscale Bitcoin Trust (G BTC ) , which was for a long time the only bitcoin accessible to a large audience via the stock market .
- The shares of these trusts can exchange with bonus or discount , and often high management fees.
- Grayscale remains a holder on the one hand significant part of Bitcoin in circulation, and offers similar trusts for various atltcOins.
Note that Grayscale is both a lever for the institutionalization of the crypto and an object of controversy for certain investors concerned with discount or centralization. Grayscale remains a barometer of institutional confidence towards cryptos: when its trusts attract capital, this often reflects a renewed optimism throughout the sector.
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Yohan Uzzan
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
