Institutional Capital Flows into Grayscale’s Bitcoin and Ethereum Trusts

Institutions that are long on bitcoin or ether could be able to buy the two assets at a massive discount.

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key takeaways

  • 13F filings show that institutions are adding exposure to GBTC and ETHE
  • During the last quarter, institutions added $42.7 million worth of new shares of GBTC and $3.8 million in ETHE

Grayscale’s Bitcoin Trust and its Ethereum Trust both saw a big inflow of capital from institutions during the last quarter as the overall digital asset market briefly turned into a bear market during the early summer. 

According to 13F filings — a requirement for funds that manage over $100 million in assets — institutional investors collectively increased their holdings of GBTC shares by 1,125,760, or $42.7 million, and holdings of ETHE by 127,216 or $3.7 million for the filing period that ended June 30. 

Ark Investment management

Catherine Wood’s Ark Investment Management led the way by adding 881,842 shares of GBTC and 82,867 shares of ETHE, according to filings. Ark now owns approximately 9.5 million shares of GBTC and 721,936 shares of ETHE.

As Blockworks has previously reported, Wood said in late June that Ark had “bought the dip” picking up more of Grayscale’s shares as well as expanding their position in Coinbase. 

Wood also believes that bitcoin has the potential to hit $500,000.

Rothschild Investment

Rothschild Investment came next adding 100,000 shares of GBTC, almost tripling its exposure from approximately 40,000 last quarter. Rothschild also added 13,817 shares of ETHE. The firm has approximately $1.2 billion in assets under management. 

Parkwood 

Filings show that Cleveland-based Parkwood also increased its crypto exposure. The firm added 32,000 more shares of GBTC bringing its total to 125,000 while also buying in to ETHE for the first time bringing its total ETHE holdings to 189,275

Institutional investors may be attracted to increasing their holdings of GBTC and ETHE because of their prolonged discount over the value of their holdings.

According to YCharts, shares of GBTC are trading at a discount of 10.4% over NAV while ETHE has a discount of around 4% over its NAV. When the funds go through their periodic unlocks, the holder of shares has the opportunity to redeem the shares for bitcoin at market price which makes for the ability to obtain crypto at a significant discount should a bull market kick in.

Both of Grayscale’s trusts have seen significant outflow from retail investors as regulators in Ontario, Canada have approved bitcoin and ether ETFs for the Toronto stock exchange. Retail investors tend to prefer the liquidity of an ETF versus the long lockup periods of a structured fund.

While the SEC hasn’t signaled when it intends to approve the many bitcoin ETFs before it, Grayscale has previously said that the fund has a sunset on it as it intends to convert it into an ETF in the future. 

But until that happens institutional investors seem content to park their capital in the funds to get crypto at a significant discount.

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