Is Grayscale Bitcoin Trust Really Bitcoin?

Bitcoin price is currently rising as there are more buyers than sellers. It’s that simple. Of course, the buyer always buys optimistically. That is, you are buying today because you believe that in the future the price will go up and you will make a profit. We want to think, of course, that our assumptions about tomorrow are objective. However, for the most part, these are emotional bets, motivated by the humor in the area. What we call “institutional capital” is nothing more than a group of people who constantly meet at conferences and cocktails. What is the Grayscale Bitcoin Trust? And why is it fashionable?

The top fund managers are household names. Usually everyone goes to the same clubs and eats in the same places. You compete for customers. But they often work together when it is convenient. The big goal of any fund is to outperform the SP 500 every year. Task that is not always easy. However, you have to do this to justify their high commissions. The world of hedge funds is not an easy one. The pressure is immense. Because the numbers should always reflect the promised success. Otherwise, the truckers union, college of accountants, community, or millionaire’s widow can take your money and partner with another fund that gets better results.

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Is Grayscale Bitcoin Trust Really Bitcoin?
Is Grayscale Bitcoin Trust Really Bitcoin?

Passive funds are less stressful. These funds promise nothing. You just put the money in a pre-determined list of companies and that’s it. These are the famous index funds. The best known are Blackrock and Vanguard. These titans are in everything because that’s exactly what they promise. That is, a piece of the SP 500 or the Dow Jones. The big advantage of these funds are the low commissions. Hedge funds are controversial in this regard as profits tend to shrink sharply due to high fees. In many cases it is therefore better for the investor to invest directly in an index fund and to avoid complications. This logic marked the success of John Bogle, the founder of the Vanguard Group.

The Grayscale Bitcoin Trust is a fund founded by Barry Silbert that basically works like an ETF, but is not an EFT. That means you only have Bitcoin, but the fund as such is a number on the exchange. So traditional investors can simply call their broker and ask them to buy Grayscale Bitcoin Trust (GBTC) instead of buying Bitcoin directly. In this way, You get the best of both worlds.

The advantages of grayscale are many. First, it’s extremely easy to buy in bulk. On the other hand, the investor shouldn’t worry about regulatory, tax, or custody issues. In other words, all these complications with private keys, hacks, or legal ambiguities are no longer an obstacle when it comes to investing heavily in Bitcoin.

These are very relevant topics for the institutional investor. We need to remember that when we talk about institutional capital we are actually talking about other people’s money. In most cases, these funds are funds of funds. For example, the humble nurse is affiliated with the nurses union. The leaders of this union are always fighting for a better collective agreement, but at the same time they charge their members a monthly fee. In many cases, these organizations offer multiple services, such as insurance or a retirement pension.

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However, these funds are usually administered by a third party as the union executive usually does not want to bear such a burden. That’s why they usually go to one of these fund managers. But we have to remember that it is not easy to run a union. The political rival, envious colleague or disgruntled member who is always looking for the five legs of the cat to discredit the current board of directors is never missing. Not to mention that the authorities always monitor all of their movements in search of irregularities or acts of corruption. That means having Bitcoin in a cold wallet under the mattress is a big no in this case. Sorry Puritans, but that would be grossly irresponsible.

What we have now is a great triangulation. The funds put their money in a mutual fund and the mutual funds put some of that money in the Grayscale Bitcoin Trust. In December 2017, Bitcoin buyers were mainly private investors. That is, the taxi driver, the hairdresser, the curious young man and the adventurous businessman. To a lesser extent, there are some venture funds and some family offices. But basically they were Individuals who use their own money.

At the moment the scene is very different. Who are the main customers at the moment? Well, PayPal, Square, and Grayscale. So we’re basically talking about indirect purchases. It is no longer the individual who uses their own money and keeps their keys private. It is the institution that buys on behalf of a group. Ironically, words less, words more, the system is under attack by middlemen. Obviously a great paradox for an instrument whose main purpose is to eliminate intermediaries.

Dogmatists solve this paradox with complaints. This means that the people who support this dissonance in their impotence turn to Twitter with their complaints. “PayPal is not Bitcoin” etc. The libertarian track within the Bitcoin community is outraged by any non-individualistic option in the anarcho-capitalist scheme. Frustration is natural. But at some point this group will be the losing side of the fight. The mediators come and do not ask for permission. Dogmas don’t work.

Like it or not, life is paradoxical. The only way to survive is to learn to live with everyday contradictions. The double answer. Is the marriage good? Yes and no. I am happy? Yes and no. Is Bitcoin a decentralized cryptocurrency? Yes and no. Is grayscale bitcoin? Yes and no.

The cypherpunks who introduced Bitcoin in the early stages did so because of its very special properties. Decentralization, its portability, the pseudo-anonymous element, etc. Indeed, Bitcoin is a very useful tool in some cases. He is king in the dark web. It is very popular in online casinos. It plays a prominent role in the gig economy and money transfers. And it is a very important tool in the foreign exchange market. Especially in places with exchange restrictions. In any case, the introduction of Bitcoin is the fuel of the whole system because of its special characteristics, but that doesn’t mean there is no room for speculators.

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Art usually has aesthetic properties. The ideal place to do a million dollar work would be a museum or a large hall. So it would be a tragic irony to put a Dalí or a Picasso in a safe. Some would say it’s a paradox. A work of art that no one can appreciate is nonsense that would offend many art lovers. Paradoxically, however, this is the goal of many works of art. Why pay millions of dollars for a piece that no one will enjoy? The answer is simple. For the money. Art in this case is a speculative asset.

Now the petrol of art is art lovers. But that doesn’t mean that speculators can’t ride this wave. In other words, both worlds can coexist. Indeed, they exist for mutual benefit. There is no paradox deep inside. Only two different contexts are intertwined. The same goes for Bitcoin. The bitcoin in my cold wallet strengthens the bitcoin of grayscale and grayscale strengthens the bitcoin in my cold wallet. Institutional capital is a boon to everyone. Old school dogmatists will continue to complain. But overall, there are always groups in the world who complain about anything. Up, Bitcoin!

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