Grayscale momentarily stopped investments into six of its trusts, including Bitcoin and Ethereum Trusts, few days after Bitcoin prices broke $20,000 and climbed to new all-time highs.
Grayscale no longer accepted investments in trusts following the performance of Bitcoin, Ethereum, Bitcoin Cash, Ethereum Classic, Litecoin, and the Digital Large Cap Fund.
The halt took place after a six-month lock-up period for selling the newest purchased shares of the Bitcoin fund, traded under the symbol GBTC, came to an end.
A spokesperson for Grayscale, Corey Law, said,
“We’re just at that point in the year where those windows the public window will be closing. And then the private window will be open,”
It has implications for GBTC holders and also for Grayscale’s crypto buying strategy, where buying digital assets at a lower price means a larger holding and potential gains for GBTC investors.
The shares of the Bitcoin Trust under the GBTC trades at a higher price than the underlying Bitcoin, because of the buying pressure from the institutional investors with little alternative options for purchasing BTC.
Even at a 30% premium buys Bitcoin outright, GBTC shares are enticing to traditional investors for they are available to buy and trade on existing stock exchanges, and can be contributed to IRA accounts and other famous retirement vehicles.
Dealing with GBTC also eliminates the steep learning curve that came with getting familiar with transferring, holding, and managing digital assets in native blockchain-based wallets or smart contracts.
There can be another benefit to Grayscale for stopping the acceptance of new GBTC investments; buying Bitcoin at a smaller price. Ben Lily from Jarvis Labs mentioned that the halt coincided with the end of the mandatory six-month lock-up of GBTC shares purchased in June 2020.
Shares bought during that time can now be sold in the open market to non-accredited investors who can’t invest in Grayscale’s Bitcoin Fund right away, putting downward pressure on the price of GBTC. And because Grayscale’s Bitcoin holding is large that downward pressure can carry over the raw Bitcoin prices as well.
If the mentioned scenario plays out, buying Bitcoin for Grayscale’s fund can be cheaper than before the selling began, resulting in more Bitcoin purchases for the investors. Since bitcoin tends to lead the price movements of other assets like ETH, lower BTC prices indicate lower Ethereum prices as well.
Grayscale purchased over 161,000 Bitcoin June 2020 and has paused investments in the past when lock-ups were perishing, that is why it is unlikely the move represents a change in strategy, or that verified investors will be boxed out of the Bitcoin trust for a long time.
If the price predictions happen, those investors can be buying the dip, thanks to the brilliant investment management from Grayscale.
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