Grayscale buys more Bitcoin, is the bull market stable?

Grayscale Trust has become a force that cannot be ignored in the crypto asset market.

On September 21, BTC fell from a high of $10,988 to $10,417. Two days later, Grayscale went on a buying spree, buying 17,100 BTC. This large increase in holdings seemed to boost market confidence, and BTC rose four consecutive times on the daily chart, reaching a high of $10,956.

According to QKL123 data, as of September 28, Grayscale holds a total of 449,800 BTC, equivalent to 2.4% of the current circulation of BTC. In addition, Grayscale also has crypto assets such as ETH, BCH, and LTC.

Frequent "buy, buy, buy" has made Grayscale a "bullish bull" in the crypto market. Grayscale believes that BTC, with its scarcity and decentralization, can be used as a means of storing value and a way to escape monetary inflation. "From multiple indicators, the current BTC market structure is extremely similar to the performance before the super bull market in 2016."

An analysis of Grayscale's actions over the past three months shows that it has adopted a left-side position-building strategy, buying more often when BTC falls or after it falls, revealing Grayscale's optimistic attitude towards BTC's future.

As a professional investment institution and BTC whale, Grayscale's movements provide a weather vane for retail investors to a certain extent. However, it should be noted that Grayscale's continued increase in holdings does not mean that the bull market is "stable", and the institutions' risk control and risk resistance capabilities must be stronger. For retail investors, they should still reasonably allocate assets and control risks, and avoid blindly following investments and mindless all-in.  

Grayscale holds another 17,100 BTC

Since late September, the entire crypto asset market has been cooling down. After Uniswap issued its token, the market has not seen any sharp spikes, and as the yields of various DeFi protocols have declined, many investors have turned their attention back to traditional assets such as BTC.

In the past few years, the crypto asset market has shown a distinct pattern. After the market has experienced a round of rising prices in the middle of the year, it often experiences a correction in the third quarter. At this point in time, the market trend represented by BTC is particularly worthy of attention.

According to an interview with Honeycomb Finance, many investors have already started a "war to defend their principal". As DeFi cools down and the volatility of Bitcoin weakens, some users choose to lock in profits and wait and see. But recently, Grayscale Trust, a "bullish bull" in the cryptocurrency circle, has started to "buy, buy, buy" crazily again.

According to QKL123 data, on September 23 and 24, Grayscale BTC Trust Fund bought 6,800 and 10,300 BTC respectively, which was the largest increase in holdings in the past month. In two days, Grayscale bought a total of 17,100 BTC, worth about $186 million. As of September 28, Grayscale holds a total of 449,800 BTC, equivalent to 2.4% of the current circulation of BTC.

As the first crypto asset investment institution to report to the SEC, Grayscale Trust's holdings to a certain extent reflect the scale of traditional institutional funds entering the cryptocurrency market.

According to Bitpush statistics, in addition to BTC worth US$4.7 billion, Grayscale currently manages nearly US$800 million in ETH, accounting for 13.5% of the total investment. The remaining US$300 million is other crypto assets such as BCH, ETC, LTC, XRP, Zcash, etc.

Grayscale's repeated increase in holdings shows its optimism about the bull market in the crypto market, which also means that more and more qualified investors are entering the currency market. Grayscale's official website shows that individuals with an annual income of more than $200,000 (or an annual income of $300,000 with a spouse) or a net worth of more than $1 million (excluding primary residence) can participate in Grayscale's private placement.

What is the logic behind these high-net-worth individuals and traditional capital forces frantically buying crypto assets? Grayscale said that as global inflation accelerates, the market demand for scarce assets such as BTC is growing. By measuring some BTC indicators, Grayscale believes that the current BTC market structure is extremely similar to its performance before the super bull market in 2016.

Grayscale distinguishes the market structure based on the holding period of the coin holders. Those who hold BTC for 1 to 3 years are defined as believers (Holders), and those who move BTC within 90 days are called speculators (Speculators).

Grayscale statistics show that the number of BTC speculators is gradually decreasing

According to Grayscale statistics, the number of BTC speculators in the market is decreasing, while the number of believers is increasing, which is similar to the trend in early 2016. In addition, the current Daily Active Addresses are at their highest level since 2017. This shows that the current BTC network has a high degree of acceptance, and may also herald the beginning of a new market cycle.

"Because BTC has characteristics such as scarcity and decentralization, we believe it can be used as a means of storing value and a way to escape monetary inflation," Grayscale said in a report. Over the past decade, BTC has grown from a small experiment to a leader in new asset classes. Just as computers and the Internet have changed the way people store, process and share information, BTC has fundamentally enhanced the way to store, process and exchange value. " In the digital world, BTC has the potential to replace gold and become the ultimate value storage asset. "

The movements of “big whales” may become a market trend indicator

Unlike other crypto asset funds, Grayscale's investment behavior is open and transparent. As a giant in the current crypto market, its movements undoubtedly have a huge impact on the market. These impacts not only stay in the price changes brought about by buying and selling, but also bring fluctuations in market confidence and investor decisions.

Analyzing Grayscale's recent actions, BTC's trend has clearly risen after it increased its holdings on September 23 and 24. On September 24, BTC opened at $10,452, and then BTC's daily line rose for four consecutive days, reaching a high of $10,956 on September 28. At 3 p.m. on September 29, BTC fell slightly to $10,730, still higher than the price at which Grayscale increased its holdings.

From this round of trends, we can see that Grayscale’s large-scale increase in holdings has boosted market confidence to a certain extent. Many investors have chosen to follow suit and buy, further raising the BTC market price.

From June 9 to September 28, Grayscale increased its holdings by 84,700 BTC

According to data from QKL123, from June 9 to September 28 this year, the number of BTC held by Grayscale increased from 365,100 to 449,800, an increase of 84,700 BTC in more than three months.

Among them, June 11 to 24 was the first intensive increase phase, with a total increase of 21,000 BTC; July 22 to August 14 was the second intensive increase phase, with a total increase of 27,700 BTC; August 26 to September 2 was the third intensive increase phase, with a total increase of 11,700 BTC; September 23 to 24 was the fourth intensive increase phase, with an increase of 17,100 BTC.

Comparing with the BTC trend, in Grayscale’s first stage of increasing holdings, BTC was in a narrow downward channel, and the price fluctuated around US$9,000; in the second stage, BTC began to strengthen, rising from US$9,300 to US$11,800; in the third stage, BTC encountered upward resistance, rising to US$12,050 and then falling to US$11,150; in the fourth stage, after BTC fell below US$11,000, the price was around US$10,350.

In general, except for the increase in holdings during the rise in the third phase, Grayscale chose to increase holdings during or after the price of the currency fell for the other three times, and the number of purchases was more than 11,700 in the third phase. It is not difficult to see that Grayscale adopts the strategy of building positions on the left side, which is more in line with the concept of value investment, that is, Grayscale believes that the intrinsic value of BTC is higher, so it does not miss any opportunity to buy at a low price.

Roughly calculated based on the current BTC price of $10,730, Grayscale has not made much profit or loss from buying BTC in the past three months. It is more like a long-term investment, waiting for the bull market to come.

As a professional investment institution, Grayscale's investment behavior has certain reference significance for retail investors. However, it should be noted that Grayscale's continuous "buy, buy, buy" does not mean that the bull market is stable. Generally speaking, professional investment institutions will use various financial instruments to hedge risks, and with more abundant funds, short-term price fluctuations will not have too much impact on Grayscale. But for retail investors, they should reasonably allocate assets and control risks based on their own situation, and avoid blindly following investments and mindless all-in.