Grayscale teams up with BNY Mellon to convert their largest fund into a bitcoin ETF. Grayscale, the largest custodian of cryptocurrencies in the world, with more than 30 billion dollars in digital assets under its management, announced this Tuesday, 13, a partnership with the oldest US bank, BNY Mellon, for the administration from its flagship fund, the Grayscale Bitcoin Trust (GBTC), as part of the company’s plans to transform the fund into the first bitcoin ETF in the US.
In an official announcement, Grayscale said that, starting in October, the administrative functions of GBTC, a bitcoin fund that manages the equivalent of $21.5 billion, will now be carried out by BNY Mellon.
New York, July 13, 2021 (GLOBE NEWSWIRE) — Grayscale Investments announced today that it has selected BNY Mellon as an asset servicing provider for Grayscale Bitcoin Trust (OTCQX: GBTC), the flagship product of Grayscale Investments LLC (Grayscale). Through this agreement, BNY Mellon will provide Grayscale Bitcoin Trust with fund accounting and effective administration October 1, 2021. Additionally, it is anticipated that BNY Mellon will provide transfer agency and ETF Services for the Grayscale Bitcoin Trust upon its conversion to an ETF.
For Michael Sonnenshein, CEO of Grayscale, the decision represents a fundamental step towards transforming the fund into a bitcoin ETF: “Enjoying the participation of BNY Mellon is an important milestone in our commitment to converting the GBTC into an ETF. .BNY Mellon has a long reputation as a trusted provider and created one of the first teams dedicated to serving the growing class of digital assets.”
“Engaging BNY Mellon is an important milestone as part of our commitment to converting Grayscale Bitcoin Trust into an ETF,” said Michael Sonnenshein, CEO of Grayscale Investments, LLC. “BNY Mellon has a long-standing reputation as a trusted provider and has established one of the first teams dedicated to servicing the growing digital currency asset class. We are pleased that BNY Mellon will join the group of Grayscale’s best-in-class service providers, helping us deliver a seamless, industry-leading investment experience.”
The approval of a bitcoin ETF in the US is much awaited by the market, as all proposals submitted to the US Securities and Exchange Commission (CVM) were rejected. According to experts, the approval of a cryptocurrency ETF in the US could boost the market, mainly by facilitating the access of new investors to this asset class.
Other countries, such as Canada and Brazil, have already approved cryptocurrency ETFs, which offer The approval of a bitcoin ETF in the US is long awaited by the market, mainly because it facilitates the access of new investors to this asset class, which, in turn, can positively impact the cryptocurrency ecosystem. Some countries have already approved cryptocurrency ETFs, which can invest 100% of the equity in bitcoin or in a basket of several cryptocurrencies.
ETF – Exchange-traded fund
An ETF (exchange-traded fund) is an investment fund traded on the Stock Exchange as if it were a stock. An ETF can also be called an index fund. Most ETFs track an index, such as a stock index or bond index.
ETFs, unlike traditional closed-end funds, can be issued or destroyed according to demand. The assembly and disassembly is carried out by financial institutions accredited by the administrators of each of these products, known as authorized agents, and can only be carried out in pre-determined multiples of quotas that correspond to a creation/destruction unit. These units can be exchanged for asset baskets (in-kind model) or for cash (cash creation model).
In addition, ETFs generally provide diversification, low expense rate and index fund tax efficiency while retaining all common stock features such as limit orders, shorts, and options. As ETFs can be bought, held and sold cheaply, some investors invest in ETF stocks as a long-term investment for asset allocation purposes, while other investors trade ETFs frequently to implement market timing investment strategies.
How does a Bitcoin ETF work
In practice, an index can be composed of several Stocks or assets. For cryptocurrency ETFs, the logic is the same. There are currently some indices in the global financial market that follow the quotes of digital currencies. They are therefore used as a reference for ETFs.
Here are some of the best known ETFs:
- Chicago Mercantile Exchange (CME) futures contract bitcoin index
- Nasdaq Crypto Index (NCI)
- S&P Bitcoin Index
- S&P Ethereum Index
- S&P Crypto Mega Cap Index
Bitcoin and other crypto ETFs are also managed by professional managers. But as they are based on stock exchange indices, they have the so-called passive management.
Advantages of a Bitcoin ETF
One of the first advantages of a Bitcoin ETF or any other currency is accessibility. Thus, the small investor can buy digital coins in a very simple and even safe way.
With this type of investment, you also don’t have to go through specific cryptocurrency platforms. This can bring security to investors, as these institutions are not yet regulated.
Another advantage is diversification. You can use crypto ETFs to build your traditional investment portfolio. In addition, there are already indexes formed by a basket of cryptocurrencies, such as Bitcoin, Ethereum and others. So you can use this diversification to mitigate risks and increase your portfolio’s potential profitability.
