In a previous article, I went through the various legal entities Grayscale has formed, the impetus around the structure they use, which ones are currently being used for current investment offerings by Grayscale and those that are not.* That’s all fairly interesting, but most people care about what it means for their favorite altcoins. It would be more interesting to know if Grayscale building an investment product actually impacts the price.
Let me take a moment to remind you: I’m just a rando on the Internet, not a financial adviser. DYOR or get RKT.
Teasing out why any given altcoin is moving up or down on a given day is probably more about being tuned into the goings-on in that altcoin’s world or the wider world of crypto than anything else. Sometimes an altcoin makes a crazy move seemingly out of nowhere. Upon digging in, you find that it just announced some deal with a large company or rumors are swirling about one.
On March 17th, we saw some news like that. On that day, Grayscale announced it was launching five new investment trusts for BAT, LINK, MANA, FIL and LPT. Close followers of Grayscale knew that the underlying legal entities were formed back in 2020, with four of them (BAT, LINK, MANA, LPT) birthed into existence on 18 December 2020 and FIL on 15 October 2020. So this announcement was a bit telegraphed.
Grayscale’s announcement made it official, however, and this also meant that investors could now get exposure to these altcoins through their respective vehicles. So did it impact price?
This all becomes a bit of an eye test (full sized image here), but the chart above is the five coins in question from just before the start of 2021 to the 24th of March. That vertical blue line is midnight on March 17th. Looks like something is going on.
Zoom. Enhance:
Indeed, there were some price movements. The price axis above is done on a percentage basis and all the coins are paired against Trading View’s calculation of each coin’s price to USD (full sized image). You don’t really need to be a technical analyst to see what happened here. People woke up the morning of March 17th, saw Grayscale’s news, and started buying up these five coins. The all see moves higher at almost exactly the same time.
Zooming further into the timeframe right before the 17th:
Full sized imaged
LPT jumped the most, moving over 100% immediately after the announcement. This was followed by BAT, then FIL, LINK and MANA. Notably, Mana and LPT were down overnight before the news was digested.
But did Grayscale’s buying have anything to do with the price? How much of this was traders trying to ride the wave and how much of it was flows into Grayscale who then went and bought the coins for their fund? Grayscale lists the following as the assets under management for each of the five new investment products as of March 19th:
- FIL: $1.3M
- LINK: $1.5M
- LPT: $3.1M
- BAT: $2.2M
- MANA: $9.8M
Let’s take a look at the volume around all this:
While these numbers probably aren’t spot on due to timing and all sorts of other factors, some insight can still be gleaned from them. First off, Grayscale’s AUM makes up a very small amount of the volume, no matter how you cut it. It really only registers with LPT. There was much higher volume for all of these following the announcement, with the exception of LINK, which might partially explain why it has traded sideways since then. MANA is actually down since the announcement on March 17th, but BAT, LPT and FIL shot up and held the gains thus far.
My interpretation of all this is that Grayscale entering into positions with these coins, in and of itself, didn’t move them up, but the move by traders acting like 1st graders playing soccer and simultaneously all trying to kick the ball did. Animal spirits indeed.
It’s also very possible that while Grayscale sent out a press release on March 17th, they were selling these to accredited investors prior to that. The inception date for all these funds is earlier than the 17th, with a couple going back to February 26th.*
Is this actionable? Well, if the same thing happens with Grayscale’s next announcement of product offerings, and they release them in the same timeline as those they formed entities for, these would be the ones to keep an eye on:
- 27 January 2021 formation date:
- AAVE
- ADA
- ATOM
- EOS
- XMR
- DOT
- 10 February 2021 formation date:
- STX
- COMP
- MKR
- SUSHI
- SNX
- YFI
- 2 March 2021 formation date:
- FLOW
- NMR
- RSR
- GRT
Grayscale did have another press release prior to all this on on February 26th where they said they were “exploring” funds for all the coins listed above. Some people surely took note of this, and price movements in those coins after February 26th can probably be partially attributed to traders taking note.
Perhaps the one to keep an eye on would be Tezos (XTZ). Its statutory trust was formed on 18 December 2021 along with BAT, LINK, MANA and LPT, but it didn’t get a product launch yet. It could be that there isn’t investor demand, but my money is on that for inclusion into the next batch.
And can we all just stop and take a second to appreciate that you can now buy a REIT for land in a fully digital, blockchain based world?
Here's a link back to the first article going over the formation of Grayscale's trusts and when they launched their investment products if you want to check that out.
* I’m a little pissed at Grayscale right now. For the previous article, I went through and pulled all the product inception dates they had on their website and compared them to the Delaware Secretary of State’s records for the formation of the underlying statutory trusts. When I did this, the five coins we’re going over in this article had product inception dates listed on Grayscale’s website as 25 February 2021. After publishing the article, I went back to Grayscales website to find the press releases for this article to double check everything since the press release was quoting different dates. In those couple of days they changed the inception dates on their site. So if anybody notices my “error,” just know that I know and it’s easier to footnote it here than go and change everything. It doesn’t really change the analysis.
