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Grayscale to reportedly convert the World’s Biggest Bitcoin Fund into spot ETF

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The world’s largest crypto asset management firm, Grayscale is reportedly going to file an application to the SEC to convert the world’s biggest Bitcoin fund into spot ETF this week according to an anonymous source from the firm. CNBC’s report revealed that the ETF application will also have a 75-day review period. According to the source, Grayscale has been preparing to file its long-awaited Bitcoin spot ETF, following the footsteps of other competitors who are filing for futures-based Bitcoin ETF.

The long-term ETF strategy

Grayscale’s baby steps towards its Bitcoin ETF this year have been evident. From opening three independent crypto funds to ease the transition to an Exchange Traded Fund (ETF) to hiring the 20-year ETF veteran, Dave Lavalle as its first Global Head of ETFs, the crypto asset management giant has been determined to acquire Bitcoin ETF. Earlier this year, Grayscale CEO, Michael Sonnenshein asserted that the status of Bitcoin ETFs in the US is only the matter of “when” rather than “if.”

“A Bitcoin ETF here in the US is really a matter of when, not a matter of if…We’re looking for a couple of different points of maturation in the underlying market. That’s the final stages of what regulators need to approve those types of products.”, Sonnenshein told Squawk Box in an interview.

Spot vs. Futures backed Bitcoin ETF

As Bitcoin runs an impressive bull, staying above $62K, institutions are hopping on the Bitcoin ETF wagon. Grayscale’s Bitcoin Spot ETF application speculations are followed by SEC’s first approval of ProShares Bitcoin ETF that will track Bitcoin futures.

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However, there lies a radical difference between the two. Futures-backed Bitcoin ETF will track the price of futures products and is linked to derivative contracts traded on the Chicago Mercantile Exchange instead of the actual Bitcoin. Furthermore, Grayscale’s Spot ETF will track the price of Bitcoin itself and not its derivatives. While spot ETFs are possibly more effective, yet companies are rushing to file for futures-backed Bitcoin ETF since the former lacks the SEC approval for now.

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Grayscale Predicts Metaverse Could Become a Trillion Dollar Industry

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Metaverse has overtaken the NFT hype this bull season as more mainstream projects aims to enter the virtual reality world in near future. A Grayscale research report has estimated that the number of Metaverse users have risen by 10X in one and a half year.

The report also predicted that if the Metaverse universe continues to flourish at the current rate, it could very well become a trillion-dollar industry by next year. The following chart shows the growing number of Metaverse wallets that has peaked to new highs in the last quarter of 2021.

Metaverse

The report takes note of how Metaverse has already become a hit in the entertainment and real estate industry despite it being in the early stage. Metaverse would be the key to Web 3.0 quite similar to what Facebook did for Web 2.0. The report read,

The Web 2.0 mobile internet changed how, where, when, and why we used the internet. In turn, this changed the products, services, and companies we used, which changed our business models, culture, and politics – the Web 3.0 Metaverse has the potential to do the same.

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The Web 3.0 based economy is already a trillion-dollar industry in making, which is certainly one of the key reasons for organizations like Facebook to do a complete branding overhaul.

The following graph shows the difference between today’s online games and what metaverse with an open world system could bring to the table.

Metaverse

Metaverse Tokens on The Rise

At a time when most of the crypto market is experiencing a bearish trap right after a mammoth October, Several Metaverse tokens have surged to new all-time highs and look immune to the ongoing bearish trends. Decentraland (MANA) is one of the most popular metaverse tokens which have got attraction from many celebrities and also saw the recent sale of a virtual property worth $2.45 million which is higher than some of the luxury apartments in New York.

The native token MANA has surged nearly 9X over the past month even when most of the other crypto tokens are down by 20%.

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Metaverse
Source: TradingView

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Grayscale Funds Still Trade with Negative Premium, Here’s What It Means

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Grayscale is continuously trading with a discount compared to its underlying asset

Grayscale’s Bitcoin and Ethereum funds are continuously moving in the negative, which might mean numerous things for potential investors that would like to receive exposure to the cryptocurrency market.

Grayscale’s performance

Premium and discount rates usually reflect the performance of the fund that manages its clients’ assets. With the approval of futures-backed Bitcoin ETFs, Grayscale lost some of its clients and potential investors, the most likely the reason for the conversion application filled previously.

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The premium rate in fact reflects the net asset value compared to the share price. When the price of the ETF trades below its NAV, the fund is trading at discord and vice versa.

How market usually reacts

If a trader has to choose between the fund and the underlying asset, he could use the premium or discount rate to determine which offering on the market will be more beneficial.

With a high premium, a trader has to overpay for the same position that he or she could have opened on the spot market.

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The average premium rate for the Grayscale Bitcoin fund has been staying at around 28% with the maximum reaching 132%. But after the increased volatility on the market, Grayscale’s tracking had deteriorated, especially after Bitcoin lost 40% of its value in May.

The tracking issue remains one of the main issues for both private and exchange-traded funds. With the approval of the futures-based Bitcoin ETF, institutional traders indeed receive exposure to the cryptocurrency market but, unfortunately, have to pay high roll costs, go through contango bleed and lose up to 20% of unrealized profit.

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Grayscale Tops $60 Billion, Surpassing World’s Largest Gold Fund

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Grayscale has eclipsed $60 billion in assets under management

Cryptocurrency money manager Grayscale now controls $60 billion worth of digital assets, according to the firm’s Wednesday update.

It has now surpassed SPDR Gold Shares, the biggest and most liquid gold exchange-traded fund in the world, in terms of assets under management.

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Grayscale Bitcoin Trust accounts for 71% of the aforementioned sum with $43.5 billion.

The firm’s Ethereum fund comes in a distant second place with $14.8 billion.

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Earlier this year, Grayscale launched trust funds for numerous altcoins, as well as a fund that is entirely focused on the decentralized finance (DeFi) industry.

Grayscale, which is a subsidiary of venture capital giant Digital Currency Group, filed to convert its Bitcoin fund into an exchange-traded fund on Oct. 19. However, analysts note that the approval of a spot ETF in the U.S. is extremely unlikely for now.

Digital Currency Group is valued at $10 billion as of early November.

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