Body: OK, as I was doing research on cryptocurrency, I kept coming across the term Grayscale Trust. I thought that it might be interesting to find out exactly what this organization is. Turns out, Grayscale is very colorful indeed, (sorry.) Grayscale Investments is the world’s largest digital asset manager with $50 Billion in Assets under Management. I didn’t get to see the Y-K-1, but this company has a number of related entities where Grayscale Investments owns several trusts. Each trust owns a quantity of one type of cryptocurrency. The big news here is that Grayscale Investments just became an SEC reporting entity. Now they are required to give occasional reports to the SEC. But, in compensation, they appear much more attractive to many new investors and the lockup period for new shares has been minimized from one year to 6 months. (The lockup period is when you buy shares in some entities, there is a covenant that you can’t sell those shares for a certain period of time. The idea is to provide stable ownership for a new entity.) It would appear that Grayscale is going to add an ETF based upon cryptocurrency futures.
Can they really make this work?
This is uncertain. With the advent of hundreds of cryptocurrencies, Bitcoin has been getting much less attention lately. Having said that, the Bitcoin-based ETF might actually become a hedge against other cryptocurrency investments. As for legalities, because only “sophisticated” investors are supposed to be involved, this Trust skirts the requirements of registering with the SEC.
Are they planning to monetize the metaverses?
In a word, yes. In point of fact, they have already begun this process. They already launched the Grayscale Decentraland Trust which makes investments in virtual real estate. (For those new to the sphere, Decentraland is a metaverse where groups of friends can gather and go see a concert, look at art, or many other activities. But, some portions of the map are more traffic-dense than others, so, there has sprung up a rather intense marketplace for real estate.) “A couple of years ago we began to notice that within the digital asset ecosystem, there was starting to be a convergence between virtual reality, gaming, and digital assets,” Michael Sonnenshein, CEO of Grayscale Investments, told Insider in an exclusive interview. The pros are profiting in 3 ways:
- The coins native to these metaverses are rising in value.
- The value of virtual real estate is rising.
- As advertisers wise up to this new trend landowners can rent their land to showcase products for others.
So, how do I get a piece of this metaverse?
One direct way is to buy and hold the coin native to that universe. (Axie Infiniti is another metaverse, this one in outer space, and economists have written whole papers about this economics system.) And there seems to be room for profits. Year to date, the MANA, native coin in Decentraland, is up 4,000%. Some are even squirreling these coins away in their IRAs. But please be aware that Grayscale requires a minimum investment of $50,000 and requires fairly consequential fees. The advantage is that Grayscale is quite large, comprising almost 46% of bitcoins held by private companies. Also, the GBTC is overseen by the SEC, and storing quantities of Bitcoin securely can be quite challenging. So, whether or not to invest involves a rather complex balancing test.
Is There Competition to the Grayscale Bitcoin Trust?
Yes, there are other bitcoin trusts to choose from. But, none are able to match its size or buying power. In the alternate, there are a few firms (many not in the U.S) that are trying to institute a Bitcoin ETF, which will allow them to support the fund with very very low fees.
The Verdict
There is an old joke. “Where does an 800-lb gorilla sit in a movie theater? Answer: Wherever he or she wants to.” And, there is some resonance to this situation. The GBTC is so incredibly huge as compared to the competitors, it really becomes quite silly to even consider a competitor that is available today. But, please note the idea of “available today.” Just like our Simeon forefathers and foremothers, evolution does exist: This evolution also exerts force upon the financial products offered within a marketplace. Other more practical or sexier options will come around. The question we are left with is, “How do we take advantage of cryptocurrency’s HUGE market splash without taking a bath ourselves?” In view of the rather large minimum deposit and the rather large fees, it would seem advisable to wait to see what is coming around the mountain.\
REFRENCES
What Is the Grayscale Bitcoin Trust? (investopedia.com)
How to Buy Grayscale Bitcoin Trust tokenized stock FTX | Coinbase
Grayscale Bitcoin Trust (GBTC): What You Need to Know | ThinkAdvisor