If you think it's too late to buy Bitcoin, Think Again.
Some of you may or may not know about an OTC "stock" called GBTC. For those who don't, in a nutshell, it is a "trust" set up and managed by Grayscale whereby accredited investors can buy bitcoin exposure without having to actually do any of the custodying of keys or coins or any of that. They send money to Grayscale, Grayscale buys BTC, and then one year later, they issue "shares" of GTBC that the investors can then sell on the open market. Like I said, it's a way for people to get exposure to Bitcoin (and other cryptos) without ever having to actually buy a crypto. In todays day and age, you can see why that might be attractive to people. Get the benefit without having to take the security risks.
Anyway, for most of the last year, GBTC has traded at a premium to the price of bitcoin. In fact, back when bitcoin first started testing 2017 highs, it was as much as 40%. In the last few weeks, that premium has gone negative. Shares of GBTC are now trading at a discount to the bitcoin price. I own a little, so I wanted to figure out why. While I didn't open a Pandora's box, I did get some very interesting information which basically blew away my concern for the premium.
According to Grayscales Q4 2020 "Digital Asset Investment Report" found here, DISCLAIMER: Grayscale issued this report but doesn't deem it as "filed". In other words, they reserve the right to change it) anyway, according to that report, some very interesting things happened over the last 12 months.
For one thing, Grayscale increased its assets under management (AUM) by 10x last year: $2.0B to $20.2B. Hello! That's a pretty good year. lol You know what they say about making your first billion.....I guess the billions after that really are "easier".
Also, in Q4 alone, Grayscale experienced inflows of approximately $3.3B for a yearly total of $5.7B. This number is ALMOST 5X the cumulative inflow of $1.2B they brought in from 2013-2019, and the Q4 number is almost triple by itself. (see my comment to the previous paragraph)
If these numbers aren't amazing enough, what I *really found interesting was the fact that those Q4 inflows accounted for approximately 194% of ALL BITCOIN MINED during that time. In other words, Grayscale alone, not the exchanges, not the rest of the world, just Grayscale, took in enough money to buy almost double the "new" bitcoin coming into existence.
There were also a couple other nuggets to relate. One of them being that institutions accounted for 93% of inflows in Q4*. Not only is that a big number, $3B, they also increased their average commitment from $2.9M per institution to $6.8M in Q4. In other words, not only are a lot more getting in, but they're getting in with increasing size.
Those were some of the "where we're at and what we did" numbers. But Grayscale also provided some "forward-looking" statements using these numbers as a basis.
First, they think that it has become a "Bitcoin Arms Race". Where it used to be a career risk to invest in Bitcoin, now it's becoming a career risk to "be a laggard". More telling is this line: *"In 2020 we saw institutions adding Bitcoin to their balance sheets--in 2021 we may see nation states follow suit." Yup, no money there, right? I mean, if you are in charge of the printer, you might be able to scrounge up a little cash it invest....
Next they talk about RIA's. Again, I quote, *"Asset managers advise on approximately $80 trillion in assets and most have not yet recommended digital assets." Bitcoin itself accounted for 87% of all inflows into Grayscale in Q4 of last year. You do the math.
Another tidbit, credit cards accounted for over $4 trillion in annual spending and debit cards $3 trillion. With the advent of credit cards paying back bitcoin as rewards, there could be a huge demand generated as major credit card companies need to keep up with the competition.
Next is a quick paragraph on defi. They expect *"major financial firms to consider integrating with decentralized protocols." Traditional banking can no longer compete with the yields being delivered in the cryptosphere. It really is only a matter of time.
They finish with another suggestion that nation states are looking at this space. Citing a Jan 4th, 2021 article from the OCC they think that *"US banks may look to incorporate digital currencies into their settlement infrastructure."
All of this is obviously extremely bullish for bitcoin and the rest of the cryptocurrency markets. Institutions are buying at record levels, supply continues to be eaten up by new investors, new "sinks" continue to be invented to take even more bitcoin off the markets, and now even nation-states are starting to look at getting involved. All this and we haven't even talked about the fact that pension funds are starting to get involved as seen in New Zealand and Israel among others.
I'll finish with their conclusion as it pretty much sums it up.
*To quote Thomas Jefferson, "Paper money is liable to be abused, has been, is, and forever will be abused in every country in which it is permitted." 2020 was the year institutional investors recognized that Bitcoin is a viable option for offsetting the abundance of paper money and the cumbersome nature of gold. In a world with over $17 trillion of negative yielding debt, we believe Bitcoin will continue to become a cornerstone of investors' portfolios in 2021.
In other words, it's not too late.
Stack those sats.
As always, I am NOT a financial advisors and this is NOT financial advice. The information presented here is for educational purposes only. Cryptocurrencies can and do go up and down and you could lose all your money. Do your own research!
Thank you for reading. If you like the content, please consider a comment and an upvote. I am more than happy to reciprocate.
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