Credit to user They for mentioning this on bitcoin price thread. Bonus commentary video by Aaron Bennett "The Institutions are here - 2020" https://www.bloomberg.com/news/arti...serves-right-to-put-up-to-10-in-bitcoin-trust Guggenheim Fund Reserves Right to Put Up to 10% in Bitcoin Trust By Joanna Ossinger November 29, 2020, 1:18 AM PST 666296Z GUGGENHEIM PARTNERS LLC Private Company Count Guggenheim Partners LLC among those institutional investors casting an eye on cryptocurrencies. Guggenheim is reserving the right for its $5.3 billion Macro Opportunities Fund -- which aims for total return via fixed income and other debt and equity securities -- to invest in the Grayscale Bitcoin Trust. The trust’s shares are solely invested in Bitcoin, and track the digital asset’s price less fees and expenses. “The Guggenheim Macro Opportunities Fund may seek investment exposure to Bitcoin indirectly through investing up to 10% of its net asset value in Grayscale Bitcoin Trust,” the firm said in a filing Friday to the U.S. Securities and Exchange Commission. Investments in Bitcoin would put Guggenheim and its Chief Investment Officer Scott Minerd in with the likes of Paul Tudor Jones and Stan Druckenmiller, who have already said they’ve put money into the digital asset. The largest cryptocurrency has had a strong run in 2020, nearing its December 2017 record highs above $19,000 before falling back. As of 7:30 a.m. Sunday in London it was in the mid-$17,000s. Guggenheim’s filing, which describes cryptocurrencies as “digital assets designed to act as a medium of exchange,” also lists a wide variety of risks. Those include prices that “can be highly volatile,” regulatory changes, a crisis of confidence in the Bitcoin network, a change in user preference to competing cryptocurrencies, and trading on “largely unregulated” exchanges that may be more exposed to fraud and failure than regulated, established bourses for other asset classes. Guggenheim appears to be sticking narrowly to the Grayscale vehicle as a potential source of crypto exposure, though. “Except for its investment in GBTC, the Fund will not invest, directly or indirectly, in cryptocurrencies,” the filing said.
Purchases of GBTC is actually more bullish for bitcoin than buying bitcoin itself. GBTC fund currently only purchases bitcoin but doesn't sell any bitcoin so the more it purchases the less bitcoin is available in the open market to trade. Large purchases of GBTC causes the fund to purchase more bitcoin but when investors sell GBTC, there needs to be buyers of the shares to match the order. Bitcoin isn't sold to retire GBTC shares.
Yes, this is makes it likely that in the next bear market, GBTC will trade at a discount to bitcoin itself. Especially given that 2% annual fee
Yes, in a panic sell GBTC could drop 20% while bitcoin drops 5%. GBTC could fall 50% below NAV though not likely that far as the arb traders likely to step in before it gets that far. The 15-30% premium to NAV is likely to disappear at some point. Someone compared GBTC to pacman. The coins keep going in but never come back out.