GBTC is no longer popular, and Grayscale has begun to vigorously deploy altcoin products

In the crypto world, "Pixiu" and "Bull Market Engine", Grayscale was in the limelight before 2021. Until January 10 this year, the good days came to an abrupt end.

According to statistics from SoSoValue, GBTC has experienced a cumulative outflow of more than US$10 billion since January 11, causing the total net asset value to drop to US$27 billion. Compared with the other 10 spot Bitcoin ETF products, GBTC is the only product that continues to experience net outflows.

The positive factors during tailwinds will be amplified. Only the choices at low tide are more representative. In these two months of dramatic changes, the grayscale is obvious. The pace has been accelerated and the introduction of new products and layouts has begun to accelerate. This article aims to briefly sort out this and find out what it is.

Open private placement of 5 altcoin trusts

On February 15, Grayscale email notification showed that the private placement subscription of some cryptocurrency trusts has been opened to accredited investors, including Grayscale Bitcoin Cash Trust, Grayscale Chainlink Trust, Grayscale Litecoin Trust, Grayscale Solana Trust, Grayscale Stellar Lumens Trust, among which subscriptions will be made at Net Asset Value (NAV).

In one sentence, the private placement of five cryptocurrency trusts, BCH, LINK, LTC, SOL, and XLM, is open for subscription by qualified investors - according to Grayscale’s official website According to the disclosure process, the product life cycle of its trusts currently includes four stages: private placement, public quotation, U.S. Securities and Exchange Commission (SEC) quotation, and ETF type. That is to say, in addition to the Bitcoin Trust GBTC, other crypto trusts are also It is only a closed-end fund and cannot be redeemed in both directions in the market.

Coinglass statistics show that in less than a month since the opening of private placement subscriptions on February 15, the holdings of these five crypto trusts in Grayscale Funds have increased significantly, showing a trend of net inflows .

Among them, the net increase of LTC exceeded 44,300 pieces (over 3.5 million U.S. dollars), the net increase of BCH exceeded 4,062 pieces (about 1.6 million U.S. dollars), the net increase of XLM exceeded 4.92 million pieces (about 680,000 U.S. dollars), and the net increase of LINK An increase of over 100,000 coins (approximately US$2 million).

Only SOL is out of stock—a net increase of over 97,500 pieces, worth over US$13.5 million.

Obviously only GBTC has been converted into an ETF, so why after the private placement was opened, a large number of OTC funds participated in the private placement subscription of these 5 altcoin crypto trusts?

Arbitrage and gaming behind the subscription

The reason lies in the unique arbitrage space caused by the large premium in the primary and secondary markets and the special redemption mechanism.

High premium of more than 130%

As shown in the figure above, it can be clearly found that the above five altcoin crypto trusts all have large positive premiums-old PoW coins such as LTC and BCH The premiums are generally over 130%, SOL has a premium of more than 870%, and LINK is as high as 830% (of course, the total holding volume of LINK trust is only US$8 million).

This kind of premium is specifically the difference between the index currency (can be regarded as the primary market) and the corresponding US share amount (secondary market price). Taking LTC as an example, the positive premium is 161.79%. It refers to the secondary market transaction price of each share of ETCG, which is 161.79% of the actual value of the corresponding ETC share represented behind it.

Therefore, under this background, combined with the "naked multi-trust" mechanism of Grayscale Crypto Trust, it perfectly constitutes an arbitrage path that smooths out the positive premium space.

"Naked Multi-Trust" Mechanism

Here we need to briefly introduce the creation/redemption mechanism of Grayscale Crypto Trust which is close to "Naked Multi-Trust".

Taking GBTC before the switch to ETF as an example, Grayscale Cryptocurrency Trust cannot directly redeem its underlying assets - there is no clear exit mechanism, and there is no "redemption" or "holding reduction" for the time being.

This means that these crypto trusts themselves are "naked multi-trusts" - only in and out in the short term (but Grayscale currently charges management fees in proportion, and the form is currency-based, This is why its holdings are regularly reduced by small amounts).

To be more specific, let’s still take ETCG as an example: the way for investors to obtain ETCG shares, in addition to direct purchases on the US stock secondary market, is to deposit the corresponding ETC tokens through private placement subscription. After the lock-up period, You can unlock and get the corresponding proportion of ETCG shares (according to public information, the lock-in period is 12 months).

Then there is actually an opportunity for arbitrage. For example, investors can participate in the private placement of ETCG with ETC in the primary market, obtain an equal share based on the net value of the assets submitted, and at the same time open in the contract market, etc. Price ETCG short hedging (if the bet is still at a positive premium after 12 months, even the short hedging step can be omitted).

After waiting for 12 months, the unlocked ETCG shares in your hand can be sold in the US stock secondary market. At the same time, the corresponding short orders are closed, and the net profit of Grayscale ETCG trust net value and the US stock secondary market The difference between ETCG in the market completes the entire arbitrage process.

In one sentence, it is equivalent to arbitrageurs buying ETC on spot in the crypto market and selling ETHG in the US stock market. Therefore, from a market perspective, the current high premium of ETCG, etc., is like a 12-month contract. "Call option".

Of course, this call option with huge arbitrage space may be just an asymmetric game - ETCG is open to institutions and qualified investors in the primary market through private placement, allowing it to be used in the secondary market. The shares acquired will be sold in the secondary market, and those who take over the shares at such a negative premium in the secondary market of US stocks are undoubtedly ordinary US stock investors with imbalanced information.

In fact, from 2020 to 2021, Grayscale’s Bitcoin Trust GBTC and Ethereum Trust ETHE have experienced similar positive premiums and arbitrage situations, but with the bankruptcy of Three Arrows Capital in 2022, DCG Due to the crisis and other series of shocks, the premium of GBTC not only turned from positive to negative, but the negative premium even exceeded 50% at one time, completely blocking this arbitrage path.

It’s just that with the renewed hype of spot Bitcoin ETF news in mid-2023 and the advancement of GBTC switching to ETFs, the negative premium of GBTC has created the opposite arbitrage space: buying in advance with a negative premium For GBTC, bet that the ETF will pass, waiting for GBTC to be transferred to ETF in the future to smooth out the negative premium, thereby obtaining the premium income during this period.

Grayscale accelerates its shift to altcoins?

In addition, on March 5, Grayscale also launched its first actively managed fund-Dynamic Income Fund (GDIF).

The fund earns income by staking cryptocurrencies and will initially support nine blockchain assets: Aptos (APT), Celestia (TIA), Coinbase Staking Ethereum (CBETH), Cosmos (ATOM), Near (NEAR), Osmosis (OSMO), Polkadot (DOT), SEI Network (SEI) and Solana (SOL), with plans to distribute staking rewards in USD quarterly.

And according to the officially disclosed asset proportion of the GDIF fund, the top ones are OSMO accounting for 24%, SOL accounting for 20%, and DOT accounting for 14% % and the remaining part accounts for 43%, which undoubtedly eliminates the threshold for institutional investors outside the circle to participate in PoS investment.

To a certain extent, it can be called Grayscale’s biggest “product innovation” in recent years. It is equivalent to gradually turning to active participation in obtaining crypto-native income, and provides institutional investors with a simple way to obtain PoS rewards. .

If you are poor, you will think about change, and if you change, you will be successful. You must know that Grayscale has been an important representative of buying institutions in the crypto world since its birth in 2019, and is also one of the largest crypto “big whales”. The greatest narrative value over the years is undoubtedly its investment in the form of trust funds. Provides compliant cryptocurrency investment channels.

Only after the spot Bitcoin ETF was approved on January 10 this year, Grayscale’s role as an “institutional investor pipeline” encountered continuous capital outflows due to its high management fees and other factors, and Caused the largest market selling pressure in the short term.

According to monitoring by crypto trader Fred Krueger, as of the last trading day, the BTC holdings of another 9 spot Bitcoin ETFs have just completed the reversal of the gray GBTC holdings:

9 The BTC holdings of the spot Bitcoin ETF reached 405,000 BTC, surpassing the 396,000 BTC holdings of GBTC. It has surged in 2 months and overturned GBTC's leading position in the past 5 years.

Summary

Perhaps because of this, Grayscale’s new moves in the past two months have been centered around altcoins other than Bitcoin. , hoping to tap into new big profits by shifting its focus to other Crypto trusts in addition to Bitcoin Trust, which has fallen to the first place:

• Replicate the nearly only compliant entry like GBTC back then Channel status, enjoying the "compliance premium" that institutional investors are willing to pay, and continuing to make a fortune in silence.
• The good days when there is a tailwind are always missed by people, but for Huidu, it is still unknown whether the good days of making money in 2020 can come back.

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