203,000 BTC: Grayscale Investments Now Holds Over 1% of Bitcoin's Circulating Supply

Grayscale, a digital currency investment firm established in 2013, now holds over 203,000 bitcoin (BTC) - an amount currently worth about $780 million according to CryptoCompare data.

According to LongHash’s research, this makes Grayscale - a subsidiary of the Digital Currency Group - the largest institutional holder of bitcoin, with more than 1% of bitcoin's current circulating supply of about 17.4 million coins.

BTC Investment Trust Trades "At 22% Premium" Over Bitcoin's Market Price

The large amount of BTC is held in Grayscale’s Bitcoin Investment Trust and its “shares are the first publicly quoted securities solely invested in and deriving value from the price of Bitcoin”, LongHash’s post explains.

Despite the long bear market this year, Grayscale has reportedly seen its investors adding to its “bitcoin position each month of 2018.” Moreover, the company’s BTC Investment Trust presently “trades at a 22% premium” over bitcoin’s average market price, which suggests that this type of financial instrument may be more appealing to accredited investors.

As CryptoGlobe reported on November 1st, Grayscale had released its Q3 2018 cryptoasset investment report. The year-to-date (YTD) summary of the report revealed that the investment firm had raised $329.5 million so far - in order to fund the ongoing development of its financial products.

Ethereum Classic (ETC) Investment Trust Is Worst Performing

The company’s financial outlook report also noted that the majority, 59%, of investments had come from its institutional clients. Notably, Grayscale’s management team had said that “new investment” into its products continued to remain “strong” - as it raised $81.1 million during Q3 2018. The majority of investments (59%) have come from institutional clients.

As covered (on November 22nd), the value of Grayscale’s assets under management dropped by almost $400 million due to the massive digital currency market sell-off - which has seen the market capitalization of the nascent asset class fall sharply from all-time highs of over $800 billion to currently around $125 billion.

Grayscale’s Ethereum Classic (ETC) Investment Trust has notably been one of its worst performing investments - as its value dropped from $42.5 million to $26.1 million, which was almost a 40% depreciation in a span of about 3 weeks (late October to November 22nd 2018).

Fed Rate Cuts Will Likely Boost Bitcoin Says Deutsche Bank

Neil Dennis

The central banks of some of the world's largest economies are about to embark on interest rates cuts and this is likely to play into the hands of Bitcoin investors, says Deutsche Bank's Jim Reid.

Global growth is slowing, a result of falling business confidence as trade tensions around the world increase - led by the seemingly intractable tariff feud between the US and China.

Under Pressure to Cut

While these effects are starting to be felt around the world, the caretakers of the most powerful economy on earth - under severe politicial pressure from President Trump - are already looking towards monetary policy measures that will support growth.

The Federal Reserve has already turned dovish, and even though it left interest rates on hold at 2.25-2.5% at its May and June meetings, comment from Fed officials this week has left the impression a rate cut could soon be on the way.

In a speech on Tuesday, Fed Chairman Jerome Powell said:

The cross-currents have re-emerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy.

A further hint that the Fed was moving towards a quarter point rate cut at its July meeting was Powell's assurance on Tuesday that "an ounce of prevention is worth more than pound of cure".

Dollar Weakening

Insofar as rate cuts and other monetary easing policies from the Fed undermine the US dollar, such policy dovishness can be seen as supportive for Bitcoin's price versus the US currency (BTC/USD).

Jim Reid, multi-asset research strategist at Deutsche Bank said on CNBC on Wednesday that he thought the recent move in Bitcoin was emblematic of the current weakness in the dollar:

If the major central banks are going to be this aggressive then alternative currencies start to look more attractive.

Cryptocompetitor

Reid has been a long-time advocate of alternative currencies. He said back in November 2017, just before the massive Bitcoin rally that took the BTC price close to $20,000 that the use of virtual currencies should be promoted around the world as people lose faith in central banks' ability to control fiat currency.

He said:

Although the current speculative interest in cryptocurrencies is more to do with blockchain technology than a loss of faith in paper money, at some point there will likely be some median of exchange that becomes more universal and a competitor of paper money.