Analysis of the financial backers behind Grayscale

Original title: "Interpreting Grayscale Series: Analyzing the Financial Backers Behind Grayscale"

Original source: Chain Hill Capital

Chain Hill Capital, reprinted with permission from Chain Hill Capital.

As of November 9, 2020, according to publicly disclosed information, a total of 23 companies (a total of 29 institutional accounts) hold shares in the Grayscale Bitcoin Trust. Crypto asset lending company BlockFi is the largest holder of the Grayscale Bitcoin Trust, holding approximately 24.2355 million trust shares. The traditional financial power, the Rothschild family, has also quietly entered the market, indicating that traditional financial institutions are paying more attention to the emerging crypto field.

29 institutional accounts hold trust shares

As of November 9, 2020, according to publicly disclosed information, a total of 23 companies (29 institutional accounts in total) hold Grayscale Bitcoin Trust shares, with a total of 59.5532 million trust shares, accounting for 11.55% of the issued shares of Grayscale Bitcoin Trust (Note: The statistical caliber is the information publicly disclosed by institutions in the US SEC. The trust shares held by institutions will change in different reporting periods. This article counts institutions that still hold trust shares as of November 9, 2020). The 23 companies include crypto asset lending companies, hedge funds, mutual funds, private wealth companies, consulting firms, family offices, etc.

As of November 9, there were 23 institutional investors that disclosed their holdings. Source: Fintel. Graphics: Chain Hill Capital.

Among the 23 holding institutions, some of them hold Grayscale Bitcoin Trust through multiple products under their umbrella. A total of 29 institutional accounts hold trust shares.

Mutual fund Horizon Kinetics Asset Management Co., Ltd. (Horizon Kinetics) has five trust funds (KINETICS PORTFOLIOS TRUST) and one closed-end fund (RCG) that have invested in Grayscale Bitcoin Trust. The five trust funds hold a total of 5.1777 million trust shares, and the closed-end fund RCG (the stock code of RENN Fund, Inc. listed on the US stock market, RENN Fund, Inc. is a closed-end fund under Horizon Kinetics) holds 5,460 trust shares.

Hedge fund Ark Investment Management Co., Ltd. also holds 5.1704 million shares of Grayscale Bitcoin Trust; its "Next Generation Internet ETF" (ARK Next Generation Internet ETF) holds 3.1544 million trust shares.

It is worth noting that hidden among the institutions on this list are accounts of well-known private wealth management institutions or family offices, including the investment company of the famous Rothschild family (Rothschild Investment Corp).

According to the calculation that each trust share corresponds to 0.00095299 bitcoins on November 9, the trust shares held by 29 institutional accounts correspond to a total of approximately 56,753 bitcoins. Among them, the largest position is the crypto asset lending company BlockFi, with a trust share corresponding to approximately 23,096 bitcoins.

(Note: The above-mentioned institutions do not necessarily invest in Grayscale Bitcoin Trust by subscribing to trust shares in the primary market. Public information does not show how these institutions participate. In addition, these institutions are those that have disclosed public information to the SEC, and may also include other institutions that have not disclosed information. Some institutions that previously participated in the investment trust have withdrawn during the most recent reporting period, and the statistics in this article do not include these withdrawn institutions.)

This article will take several major shareholder institutions on the list as examples and briefly introduce the background of these institutions.

Crypto asset lending company BlockFi

BlockFi is a New York-based crypto asset lending company founded by Zac Prince and Flori Marquez in 2017. BlockFi is a secured non-bank lender that provides U.S. dollar loans to mortgagors who borrow against crypto assets, aiming to provide credit services to markets that have difficulty accessing simple products such as savings accounts.

Founder Zac Prince graduated from Texas State University and has extensive experience in the field of Internet lending. Before starting BlockFi, he led the business development teams of Orchard Platform, an online lending broker and RIA, and Zibby, an online consumer lender. Another founder, Flori Marquez, has a close relationship with fixed income in his career and has served as a fund manager of a $30 billion fixed income portfolio.

BlockFi currently operates in more than 44 states in the United States. During its development, it has received strategic investment support from a number of venture capital funds in the crypto field, including the well-known Conibase Ventures, GALAXY DIGITAL, Morgan Creek Capital Management Company (Morgan Creek), Three Arrows Capital (THREE ARROWS CAPITAL), and the Winklevoss brothers' Winklevoss Capital.

Block shareholder camp, source: BlockFi official website

As of November 9, 2020, BlockFi held 24.2355 million shares of Grayscale Bitcoin Trust, accounting for approximately 4.7% of the issued shares.

Hedge Fund Three Arrows Capital

Singapore's Three Arrows Capital is a hedge fund in the cryptocurrency field, founded by Su Zhu and Kyle Davies in 2012. Its business modules include basic crypto asset investment, decentralized finance DeFi investment, equity investment and fund business.

As of November 9, 2020, Three Arrows Capital held 21.057 million shares of Grayscale Bitcoin Trust, accounting for approximately 4.08% of the issued shares.

Mutual Fund Horizon Dynamics

Horizon Kinetics Asset Management, Inc. serves as the investment advisor to Kinetics Mutual Funds, Inc., which has a total of nine mutual funds, five of which hold shares of the Grayscale Bitcoin Trust. Kinetics was founded in 1994 and became a wholly-owned subsidiary of Horizon Kinetics in 2011. As of June 2020, Horizon Kinetics has an asset management scale of approximately US$5.135 billion.

Horizon Kinetics equity structure, Source: Horizon Kinetics official website

Paradigm Fund, Small Cap Opportunities Fund, Internet Fund, Market Opportunities Fund, and Global Fund managed by Kinetics Mutual Funds, Inc. hold 1.965 million, 307,100, 2.1466 million, 601,800, and 156,500 Grayscale Bitcoin Trust shares, respectively. Among them, the largest holdings of Global Fund and Internet Fund are Grayscale Bitcoin Trust, accounting for 11.4% and 21.3% respectively (data as of 2020/9/30).

The largest holdings of Global Fund and Internet Fund are both Grayscale Bitcoin Trust. Source: Horizon Kinetics official website

Rothschild family

Among the institutions, there is a long-established family investment company, Rothschild Investment Corp. The reason why it is listed is that the company has a very long history and represents the optimism of the "old money" in the traditional field towards the emerging encryption field.

Originally known as Rothschild & Company, Rothschild Investments was founded in 1908 by Monroe Rothschild and his brother-in-law, Samuel Karger, and has long been a leading financial institution in Chicago, Illinois. When the stock market crash of 1929 triggered the Great Depression, it was Samuel Karger’s unwavering belief in personal client service, financial conservatism, and business acumen that enabled Rothschild to survive. To this day, these investment principles remain etched in the roots of the Rothschild family and form the backbone of the business today.

History of Rothschild Investment Corp., source: Rothschild Investment Corp official website

As of June 30, 2020, Rothschild Investments had $1.397 billion in assets under management (AUM) and 1,405 clients worldwide.

The investment target is Apple, holding 413,200 shares of Apple. Data source: whalewisdom

As of November 9, 2020, Rothschild Investment Company holds 24,500 shares of Grayscale Bitcoin Trust, accounting for approximately 0.0048% of the issued shares. Although the holdings are small and the number of bitcoins corresponding to the holdings is only 23, as a traditional aristocratic investment company, its attitude represents the position of traditional financial forces integrating into the emerging crypto market, and also indirectly illustrates the increasing attractiveness of the cryptocurrency market.