Guggenheim is a $5 billion Macro Opportunities fund that wants Bitcoin exposure. On Friday, 27th November 2020, Guggenheim filed an SEC amendment allowing them to invest up to 10 percent of their fund in GBTC. GBTC is offered by Grayscale that allows any fund or company to hold bitcoin on their balance sheet without actually buying one.
That is a lot of money – A 10% investment would be worth $487M, and would be $200M+ larger than their next largest position. This is amazingly bullish except for the fact that they are prepared to spend $400 million on an asset that will come at a huge premium.
Also, the fact Guggenheim Macro Opportunities Fund will pay premium is more bullish.
The two instruments are correlated: if the premium of GBTC rises, then new investors will jump on creating new shares by sending USD to Grayscale so they can buy Bitcoin that they can eventually dump on the market. This of course would generate buy pressure on bitcoin.
If you wonder why would Guggenheim pay the premium to own a trust which is basically a form of a closed end fund? After all, why that would be an efficient and effective way for them to enter Bitcoin? Well, Grayscale’s Bitcoin, GBTC is a regulated asset so everything is already sorted out for them.
Here is a quote from their SEC’s filing.
Cryptocurrencies (also referred to as “virtual currencies” and “digital currencies”) are digital assets designed to act as a medium of exchange. The Guggenheim Macro Opportunities Fund may seek investment exposure to bitcoin indirectly through investing up to 10% of its net asset value in Grayscale Bitcoin Trust (“GBTC”), a privately offered investment vehicle that invests in bitcoin. To the extent the Fund invests in GBTC, it will do so through the Subsidiary. The risks associated with exposure to bitcoin are described below.