![image.png](https://images.hive.blog/DQmSiqHpdTaUDookomQxPZ6xTK5y7SczdvqVMFsEyGmJ8zp/image.png)

# Grayscale has been buying a ton of Bitcoin, but perhaps not as much as some people might think

When people talk about how much BTC Grayscale is buying off the markets, it really is impossible to know how much of that was actually "bought".

Take this for example...

Grayscale "added" over 12k BTC yesterday while their fund was closed to new investment, how can that be?

It's pretty simple really...

This is due to the in-kind exchange that Grayscale started offering to bitcoin investors a couple years back.

This in-kind exchange allows bitcoin investors to exchange their bitcoin for shares of GBTC stock.

On first glance, hard core crypto investors might think why in the world would I want to do that?!

There's a very good reason why...

When you exchange your bitcoin for shares of GBTC, you get shares pegged to a specific amount of BTC. This amount is very likely tied to their assets under management as well as the number of shares already issued.

However, the shares in the secondary market are and have been trading at a significant premium basically ever since GBTC was created.

This means that bitcoin investors can exchange their bitcoin for shares of GBTC and those shares can hold more value than the BTC they exchanged for them.

Make sense?

These shares can then be sold in the secondary market to realize a gain even if the price of bitcoin doesn't go up.

The only catch is that the shares must be held for a minimum of 6 months.

All things being equal, if bitcoin was the exact same price 6 months later, the investor would realize the gain of whatever premium the shares were trading at, which has averaged close to 20% over the last couple years.

So, when you see that the fund is closed currently but BTC is still being added to the fund, it's very likely because investors are exchanging their bitcoin for shares of GBTC.

A benefit for them besides the potential premium windfall is the fact that they don't have to worry about custody of the bitcoin any longer, Grayscale takes care of that.

The downside is that you no longer custody the bitcoin any longer, and may or may not receive an airdrop should bitcoin fork at some point, or any of the other benefits that come from holding your own keys/coins.

This also means that when you see numbers about how many bitcoin Grayscale as added each day or each week, we must remember that those are not all recent purchases, but instead represents bitcoin that were purchased at some point.

The main benefit when talking about how much BTC Grayscale has added has to do with the liquidity removed.

When that bitcoin goes into the Grayscale Bitcoin Trust, it doesn't come back out. Instead shares come out.

So, if investors want to then sell, they sell the shares of GBTC, the chunk of BTC they tied up with Grayscale doesn't move.

That means that if more and more investors go this route, we could remove a ton of the bitcoin liquidity without having further selling impacting the spot price of bitcoin much.

Pretty interesting dynamic if you ask me!

Hope this helps further explain exactly how Grayscale and GBTC works and what the numbers mean when they are reported on a weekly and daily basis.

Stay informed my friends.

Image Source:

https://bitcoinik.com/what-is-the-grayscale-bitcoin-trust-gbtc/

-Doc

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