Lex Solkin of Autonomous Research published a 120-page report titled, "#CRYPTO UTOPIA". Lex is one of the best analysts in the cryptocurrency space and his report is excellent. There was a lot to digest so I encourage you to read it on your own. I shared the executive summary from the report below:
Grayscale Digital Asset Investment Report
Greyscale, the largest crypto fund manager, announced they have raised $250MM YTD from investors. This is a staggering amount of money for the cryptocurrency space. Greyscale has done an excellent job of establishing itself as a powerhouse in the space. It's the only US-based fund that you can invest in via a brokerage. I can just log on to my ETrade and buy GBTC.
The problem with GBTC is that it trades at a Premium NAV. In simple terms, you are overpaying for the asset. If GBTC owns 10 BTC valued at $1MM, GBTC is trading at a value over $1MM. The reason this premium NAV exists is that investors are so desperate to own Bitcoin, they are willing to pay a premium to own it. My friend Mo tweeted,
Silly that Grayscale is calling record inflows into their product in the last 6 months as the “other side of the story” when $XBT has been down over 50% in the same period. Interesting stat but hardly the other side.
Grayscale's brand is so strong that institutions are willing to pay 1% management fee and a premium on NAV just to buy Bitcoin. These are the same institutions that complain about 2/20 for hedge funds. Imagine if an investor paid 1% and a premium NAV for an S&P 500 index. Stakeholders would be calling for the CIO's head, but because it's Bitcoin, it's okay. I can't speak for the CIO's of the institution buying Bitcoin because I don't know their situation. However, I can draw two conclusions. CYA is very important and CIOs would rather blame an external fund manager than invest in Bitcoin directly if the investment went awry despite high fees. Second, if there is a demand for a vehicle with high fees that invests in Bitcoin, imagine the demand for an ETF on the NYSE with low fees.
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