wNews: Unwinding the Grayscale Bitcoin Trade

Key Takeaways

  • One of the industry’s shoo-in trades was the great Grayscale arbitrage trade. Now, it’s dried up.
  • Markets returned to local highs this week after the House passed the latest $1.9 trillion stimulus package.
  • Amid the multi-chain narrative, several Layer 2 solutions on Ethereum have been hard at work.

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This week’s edition of wNews digs into the Grayscale arbitrage trade. Understanding how this particular trade works is key to identifying its effects on the greater crypto economy. 

In short, institutional investors are making bank on high premiums from retail investors buying up Grayscale “shares.” This week, however, this premium has plummeted. 

Today’s dispatch unpacks what this means and why it’s important. 

Markets continued their upward trend after hitting a snag last month. Bitcoin is up 17.6%, and Ethereum is up 14.3% at the time of press. For reference, the leading cryptocurrency is 74% of the market cap of Google and 11% of gold’s market cap. 

Source: AssetDash

Likely much of the bullish action this week came from the latest $1.9 trillion stimulus package getting the green light. Who knows where Americans will put their incoming round of stimmy checks. 

But with death knells of the 60/40 portfolio ringing, some are likely to turn to Bitcoin. Last month, JP Morgan even backed a 1% allocation, saying

“In a multi-asset portfolio, investors can likely add up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio.”

Finally, this week’s crypto to-do list is all things Layer 2 on Ethereum.

All that and more, below.

The Great Grayscale Trade

Before this week, the great Grayscale trade was free money for investors. Here’s how it worked. 

Grayscale created an onramp for wealthy investors to lock up their Bitcoin. In exchange for this lock-up, they receive equivalent amounts in Grayscale Bitcoin Trust (GBTC)…

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