Mania

The Pac-Men of the Crypto-World

Grayscale Trust has been on a tear this quarter buying up more bitcoin than any other financial institution in the world.

Currently they hold about 365,000 Bitcoin on behalf of US accredited investors, That is just a little less than 2% (1.97%) of all bitcoin currently in circulation.

Last July, when I first reported on Grayscale, they only held 1.2% of the world’s bitcoin.

Now that bitcoin production has halved since May, expect that number to climb even higher.

It is estimated that Grayscale alone has bought more bitcoin than has been mined since the halving.

And I don’t think Grayscale will do a dump anytime soon because Grayscale, does not offer a redemption program.

That means shares in Grayscale trust can up or down as the market chooses, but owners of Grayscale trust units cannot demand that Grayscale sell the bitcoin in their portfolio.

Grayscale is one of the first investment funds that specialize in accumulating bitcoin, but other financial players want to get in the game.

In Germany, a UK financial group will list a bitcoin fund on the Deutsche Borse’s XETRA platform later this month.

I have no idea how sales will go for them in the first year, but hedge funds have to accumulate assets of least $100 million in order to make it worthwhile. So that is what they are hoping for at the very least.

The Deutsche Borshe listing will now allow European investors to buy bitcoin within their regular investment portfolios.

Other Pac-Men

Future exchanges that deal with crypto have been accumulating large deposits of bitcoin for years.

BITMEX, the largest bitcoin exchange in the world by volume, has an “insurance fund” of more than 35K bitcoin. At the beginning of 2019, it was “only” 21K.

The insurance fund of Deribit, the largest bitcoin options dealer in the world is worth more than 33K bitcoin.

Remember, after the May halving, only 900 bitcoins are now mined every day to add to the current 17.5 million bitcoin in circulation.

And it’s not like there is a stampede of sellers.

Of the twenty richest bitcoin wallets in the world, only three of them have seen any transactions in the year 2020. These wallets tie up nearly 8% of current bitcoin supply.

To summarize:

  1. The current financial trading houses and exchanges are accumulating more bitcoin than is being currently mined.
  2. New funds are coming on the market which will stimulate even more demand for bitcoin.
  3. The current owners of bitcoin (the very richest, at the least), are in no hurry to sell their current holdings of bitcoin.

It’s impossible to predict the short-term price movement of bitcoin (although some try). It’s very reasonable to expect price reversals as over-leveraged speculators get liquidated from time to time.

But long-term, it is looking very bullish.

DJ

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