Digital Currency Group plans to buy an additional $557 million of shares of the Grayscale Bitcoin Trust

The Digital Currency Group, Barry Silbert’s crypto venture capital behemoth, is planning to buy an additional $ 557 million of shares of the Grayscale Bitcoin Trust.

Digital Currency Grop is ramping up its investments into Grayscale’s Bitcoin Trust, just as the trust runs into hot water

According to a May 3 press release, a major crypto investment firm led by CEO Barry Silbert, Digital Currency Group, is set to invest up to $ 750 million into the shares of Grayscale Bitcoin Trust.

Why $ 750 million? This would bring DCG’s total investment into the trust— $ 193 million as of April 30 — to $ 750 million.

Grayscale’s parent company is not obliged to actually buy any shares. The timing of purchases, if any, will depend on various factors such as the size of its cash pile and market conditions, the press release stated:

“The share purchase authorization does not obligate DCG to acquire any specific number of shares in any period and may be expanded, extended, modified, or discontinued at any time. The actual timing, amount, and value of share purchases will depend entirely upon a number of factors, including the levels of cash available, price, and prevailing market conditions.”

However, DCG has no obligation to buy these shares and cancel at any time. It said in an announcement today that the timing and size of their investments depend on the amount of cash they have on hand, stock prices, and market conditions.

As of this writing, the Grayscale Bitcoin Trust $ 36 billion in assets under management, which is more than 3% of all Bitcoin in circulation. This is a closed trust, which means that Grayscale invites private investors to transfer Bitcoin or US dollars; In exchange, Grayscale issued trust shares. These stocks trade on a public stock exchange.

Grayscale uses all received money to buy Bitcoin and charges a 2% management fee for the incident. Stocks in trust funds to track Bitcoin price. The advantage of crypto exchanges is that institutional investors can trade through an SEC-regulated vehicle, and stocks can be purchased from tax-free accounts.

Historically, stocks have traded for prices higher than Bitcoin prices. This means that the investors paid for the honor when they bought Bitcoin through the trust. However, for the past two months, the trust fund’s shares have been trading at a price lower than Bitcoin’s price.

While the prospect of getting cheap Bitcoin looks like a good thing, institutional investors were hoping to reap the returns on rising premiums.

For large investors, such as BlockFi, Three Arrows Capital, and DCG, this is terrible. Investors lock Bitcoin in the trust every six months and often borrow huge loans to invest in the trust If insurance premiums continue to decline, investors may find it difficult to pay off those loans.

The trust also faces competition from Bitcoin ETFs or exchange funds. These provide cheaper ways to invest in Bitcoin through the stock market. There was no activity in the US, but neighboring Canada approved some this year with great success, and a new SEC administration has given new hope that the regulator can soon approve it. Grayscale plans to convert its trust fund into an ETF as soon as possible.

You can see the BTC price here.

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