Guggenheim Partners Seek Entry Into Bitcoin, Hints $500 Million Worth BTC Investment Through Grayscale Bitcoin Trust

30. Nov 2020 Posted by Akolkar B on News

Massive institutional money inflow into Bitcoin is likely to continue further. Global investment firm and financial services partner Guggenheim Partners is seeking to invest a whopping $500 million into Bitcoin via the Grayscale Bitcoin Trust (GBTC).

As per its filing with the U.S. Securities and Exchange Commission (SEC) last Friday, November 27, Guggenheim is seeking a 10% Bitcoin exposure for its Macro Opportunities Fund that manages a total of $5 billion in assets under management.

The SEC filing by the investment giant notes: "The 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”.

The filing also notes that "To the extent the Fund invests in GBTC, it will do so through a wholly-owned subsidiary, which is organized as a limited company under the laws of the Cayman Islands (the "Subsidiary"). Except for its investment in GBTC, the Fund will not invest, directly or indirectly, in cryptocurrencies”.

One of the major reasons behind investing in Bitcoin through the Grayscale Bitcoin Trust (GBTC) is a possible tax free income. The filing notes: “Many significant aspects of the U.S. federal income tax treatment of investments in Bitcoin are uncertain and an investment in bitcoin may produce income that if directly earned by a regulated investment company, such as the Guggenheim Macro Opportunities Fund, would not be treated as qualifying income.”

The filing also mentions some of the risks associated with this investment. It mentions the lack of regulatory clarity and rules that can change overnight. Besides, GBTC currently trades at a significant premium to its NAV at this point. But if ceases to trade at the existing premium in future, the value of the fund investments can fall despite the fact that GBTC holds the same BTC quantity as today.

If the SEC approves the proposal, it will probably the biggest one-time investment by an institutional player in Bitcoin. Previously, business intelligence firm MicroStrategy has pumped $425 million in Bitcoin.

A number of big players like Square Inc and others have been investing their extra liquid cash in Bitcoins over the last few months. Soon as the new broke out on Sunday, BTC price has quickly surged by over $1000 and is currently trading at $19,225 with a market cap of $357 billion.