It’s already the largest cryptocurrency asset management firm in the world with $49.2 billion in assets under management as of Tuesday, up an incredible 2,360% from just $2 billion at the beginning of 2020.
Last week, Grayscale affirmed its intention to eventually convert GBTC into an ETF, which would make it available to an even wider group of investors at a lower cost.
Michael Sonnenshein has been with Grayscale since 2014, and was promoted from managing director to CEO in January.
And I think for many investors, the perception around investing in crypto changed very materially because crypto bounced back harder and faster than other asset classes over the course of 2020.
Number two, you also saw some very noteworthy, very closely-followed, very experienced investors, entrepreneurs and business leaders publicly state their support for participation in digital currencies like bitcoin, whether it was Paul Tudor Jones or Stanley Druckenmiller, or innovative leaders and companies like Square and Twitter and MicroStrategy and now Tesla.
And number three, you also saw that the policy response to the economic slowdown related to COVID has been to print and inject our financial system with fiscal stimulus.
Well we certainly aren’t ones to ever speculate on the price of bitcoin, but we remind folks of two things — one that there is a very different set of tools available to them to look at valuation metrics for an asset like bitcoin than they would for a cash-flowing security like the common stock of a company.
But two, we would say that we are exceedingly encouraged by who is participating, the level of conviction they seem to have in investing in crypto, as well as the time horizon for doing so.
Certainly institutional investors, who have been working very closely with Grayscale now for the last 18-24 months.
We have a robust derivatives market, a much healthier two-sided market, and we’re starting to see the true development of everything from order management systems to tax lot reporting to various trading tools and portfolio management tools that investors need to include in their asset allocation.
Since 2016, we’ve been working on the development of a bitcoin ETF, and spent the better part of 2016 in SEC registration and 2017, but ultimately removed ourselves from that process, realizing that the regulatory environment was not ready to approve a bitcoin ETF.
And they may see that on one exchange or another, and they’ve entered into agreements with one another to be able to surveil anything from spoofing to anomalistic trading to bizarre trading patterns and things like that.
We’ve done some interesting surveys of both investors and financial advisors, and there’s a quite a bit of proclivity amongst both audiences to be either waiting for or only actioning an investment in bitcoin when, in fact, there is an ETF available to them.
So I’d say it’s a very wide-ranging group of investors that are already involved in GBTC, and an even larger group of investors that we could see getting involved if it were to convert to an ETF.
We certainly do see it displacing a lot of the occupancy within portfolios that gold currently has — a lot of investors ascribe it to being a digital gold, or a digital store of value.
And so over time, you see that the number of users and the level of investment in crypto has the potential to expand quite significantly if the crypto ecosystem is bridged to the legacy financial system.