We all heard some of the bigger names that are picking up Bitcoin. I guess we can say Microstrategy followed by a number of other names such as Square. Perhaps the most impressive name so far is MassMutual, one of the oldest insurance companies in the United States.
It seems everyone is getting into the game. These companies are first layer in that they are directly purchasing Bitcoin. However, there is a secondary layer that is forming that is going unnoticed in a way.
Rarely does a day go by without the name Grayscale being mentioned with Bitcoin. This company is eating up hundreds of millions of dollars worth of BTC. This company is operating in the billions (dollars) now.
This is serving as an entryway for other Wall Street firms. Many are not allowed to go direct so they have to opt for other measures.
Ark Investments is one of them. Run by Cathy Wood, they are uber bullish on Bitcoin. She even put out a forecast of $300K or $400K on Bitcoin.
It is obvious she put her, or her clients, money where her mouth is.
As we can see, there is near $200 million in market value as of December 31st. It is safe to presume that this will increase when GBTC starts trading on Monday if the move in BTC over the weekend holds.
The premium, according to YCharts, has been crashing the last week or so. This could be tied to the fact that Grayscale stopped its buying as it allowed the investors to cash out if they wanted.
Thus, as long as the premium does not plummet, we will see the $200 million mark in GBTC holding crossed.
Here is an example showing how much of a thirst Wall Street has for Bitcoin. While some companies were grabbing the headlines, ones like Ark Investments were amassing a sizeable position. Again, since this is a second layer, not all of that money went directly into Bitcoin but, rather, units in GBTC.
When considering the 17% premium that GBTC has, the Ark position is responsible for around $165 million in Bitcoin.
Here is the most fascinating aspect to this: Ark Investments is a bit player on Wall Street. It is not a major firm having about $30 billion in assets under management. Considering that there are companies like Fidelity who have $7 trillion, you can see how small this really is.
At the same time, we see who is interested. It is not the more conservative Wall Street companies that are interested. That is why MassMutual was such a surprise. Insurance companies tend to be as conservative in investing as they come. Thus, it could be a while before we see the really big money enter the world of cryptocurrency.
Whereas an Ark Investment establishes a position of $200 million, a company like Fidelity could pop in $5 billion and still have a ton of money for other projects. To them, that is not even 1% of their total assets under management.
Nevertheless, we are at the stage where companies are getting in for hundreds of millions of dollars. This will continue to expand as the market realizes the potential in Bitcoin and, perhaps, other cryptocurrencies.
The second layer that is allowing entry, Grayscale now and maybe an ETF later, is going to pull in a lot of cash during this year. I figure 2020 was just an appetizer.
After all, there are a lot of funds like Ark Investments out there. To us, $30 billion seems like a lot but in that world, it is just a boutique shop.
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