Grayscale: What is it and what effect does it have on the crypto market?

- 10 minute read

Kevin van der Linden
Digital Marketeer
Kevin van der Linden

The fact that cryptocurrencies are volatile is known by now. This volatility is strongly dependent on external factors. Anno 2021, Grayscale - the world's largest cryptocurrency fund - has become an important external factor influencing the cryptocurrency market indirectly. In this blog, I am going to tell you what Grayscale is and how the largest digital currency fund can leave its mark on the crypto world.


grayscale

What is Grayscale?

Grayscale is crypto's largest fund worldwide and belongs to the hyper ambitious Digital Currency Group (DCG), which was founded by Barry Silbert in 2015. DCG gives its support to more than 175 blockchain-related companies and is the parent company of Genesis, CoinDesk and thus Grayscale Investments, among others.

Grayscale offers market information, investment positions and investment products for the digital currencies they offer. Currently, Grayscale offers 13 different funds in which customers can invest. The largest cryptocurrencies, such as Bitcoin and Ethereum, fall under one of these funds.

Similar to Anycoin Direct, you can invest in cryptocurrency through a Grayscale fund. Investors can speculate on what the Bitcoin price will do, without having to buy the coins. Therefore, investors do not have to worry about the safety and storage of the digital currency, which is ideal for a novice crypto investor. In addition, Grayscale allows institutional investors to place large orders, unlike centralized exchanges that often lack liquidity.




The impact of Grayscale on the crypto market

To become the largest cryptocurrency fund in the world, Grayscale purchased over 284,000 Bitcoins between June 2020 and February 2021. That is about 127% of all Bitcoins mined in the same period. In total, they now own more than 650,000 Bitcoins. This gives them just over three per cent of all the Bitcoins that will ever be in circulation.

The world's largest cryptocurrency fund logically also has the world's largest Bitcoin fund, called the Grayscale Bitcoin Trust (GBTC). With the hundreds of thousands of bitcoins that they manage, there is a possibility that they could influence the bitcoin market. An example of this may be taking place this month.

This is the case. Since March 2020, the price of Bitcoin started to rise. This led Grayscale to sell many GBTC. However, the shares of GBTC that were issued have a six-month selling lock. This means that the shares purchased cannot be sold for six months.

In December last year, due to Bitcoin's massive rebound, the shares were trading at their intrinsic value. However, since 18 February, Grayscale has decided to trade the shares at a discount to the intrinsic value. This has resulted in a drop in demand.

All this has led to more than one hundred thousand shares being released in recent months. In the coming months, analysts expect the number of shares being released to increase. If these shares are bought out right away, it may have an effect on the price of Bitcoin. In the crypto world, most cryptocurrencies mirror the price of Bitcoin. Should the release of GBTC shares be the cause of a price change, then in essence Grayscale has influenced the entire cryptocurrency market.

Staying on top

With thirteen different crypto funds and holding more than 3% of the total value of Bitcoin, it is safe to say that Grayscale is a key player in the crypto world. Nevertheless, the company is bursting with ambition and plans to expand the number of funds in the near future. Word has it that Grayscale is considering adding coins such as Bancor, Curve, Kyber Network, Polygon, Ren and 0X.

Grayscale currently offers the following thirteen funds:

  1. Grayscale Bitcoin trust
  2. Grayscale Bitcoin Cash trust
  3. Grayscale Ethereum trust
  4. Grayscale Ethereum Classic trust
  5. Grayscale Chainlink trust
  6. Grayscale Litecoin trust
  7. Grayscale Stellar Lumens trust
  8. Grayscale Decentraland trust
  9. Grayscale Horizon trust
  10. Grayscale Basic Attention Token trust
  11. Grayscale Livepeer trust
  12. Grayscale Zcash trust
  13. Grayscale Digital Large Cap trust

Summary

Currently, the company is already a serious factor to keep an eye on in the crypto world. With the addition of new funds, Grayscale aims to expand further, ensuring a healthy competitive edge. Driven by its parent company DCG, Grayscale is determined to continue growing as a leader in the digital currency landscape.

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Read all you need to know about it on our Bitcoin Overview Page.