Digital Currency Group (DCG), a New York-based venture capital focusing on the digital currency market, has authorized the purchase of Grayscale Bitcoin Trust (OTCQX: GBTC) shares worth hundreds of millions.
According to a press statement published today, DCG, the parent of Grayscale is investing $250 million in GBTC shares.
Investing in its own subsidiary company
The crypto venture capital giant will use cash on hand to fund the purchase of the shares.
“DCG plans to use cash on hand to fund the purchases and will make the purchases on the open market, at management’s discretion, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934 (the “Exchange Act”)”
The authorization of investing in GBTC 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,” said DCG.
— Barry Silbert (@BarrySilbert) March 10, 2021
GBTC shares trading at a discount
The news of the purchase comes at a time when GBTC is trading at a discount. This means that the market price of GBTC shares in the over-the-counter (OTC) market is lower than the shares’ net asset value.
The discount currently stands at just over 5%. The shares have always traded at a premium.
The discount in trading suggests a number of possible scenarios. Large investors could be selling the shares to cash out some profits or they are taking advantage of arbitrage opportunities.
The other possible factor is that there other more efficient venues for institutional investors to gain exposure to bitcoin. The Purpose Bitcoin ETF was rolled out in Canada last month and enjoyed a trading volume of approximately $165 million on its trading debut.
Grayscale is currently the manager of the largest bitcoin investment product in the world as it holds more than $35 billion in assets.
Indirect exposure to bitcoin
The planned investment by the crypto venture firm means that it could end up having indirect exposure to the world’s leading digital asset.
Since many institutional investors and publicly-traded companies have shown a willingness to directly invest in bitcoin, others might prefer to buy bitcoin products to avoid the hassles of buying and safeguarding digital assets.