Guggenheim Funds Intends $500 Million BTC Investment

Updated by James Hydzik
In Brief
  • Guggenheim Funds filed an investment prospectus with the the SEC on Nov 27
  • Guggenheim will invest up to 10%, or about $500 million, into GBTC
  • Grayscale currently has 509,581 BTC in its treasury
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Guggenheim Funds filed on Nov 27 with the SEC its plans to invest up to $500 million of its Macro Opportunities Fund. The investment target is shares of Grayscale Bitcoin Trust (GBTC).

Billions in institutional demand

Institutional investor demand for cryptocurrency is exploding. Their market entry is often pointed to as a primary reason behind crypto’s 2020 bull run. Other companies, such as the software company Microstrategy, which are primarily not operating as financial market operators, are a force as well. At the time of this writing, over $15 billion in Bitcoin, or 842,364 BTC, is held by corporations.  This includes over $9 billion equivalent, or 509,581 BTC held by GBTC.

Read at your own risk

As part of the Form N-1A filing, Guggenheim Funds detailed its understanding of the risk involved when investing, especially in GBTC. The prospectus turns into a catalog of risks that make for a what’s-what of the things that can go wrong with an investment. Readers not familiar with an investment prospectus should sit down before starting.

In terms of cryptocurrencies in general and bitcoin specifically, many of the risks are known to the public. The lack of a long history of cryptocurrency tax law and the possibility of sudden changes is one such risk. Price volatility and bitcoin theft are also never far from memory. 

Risk at the high end

Other risks that are less common are a result of the structure. Guggenheim Funds, through a subsidiary, is investing into bitcoin through another entity, in this case, GBTC. Guggenheim won’t own the BTC directly. Thus, Guggenheim notes that:

If GTBC were to cease to trade at a premium to its NAV, the value of the Fund’s investment in GTBC could decrease, even if the value of GTBC’s underlying holdings in bitcoin does not decrease.

In other words, if a scandal or hack hits Grayscale, Guggenheim’s subsidiary could lose money even while the price of Bitcoin is high. At the retail level, investors might keep similar concerns in the back of their heads, as OKEx users recently found out. However, the stakes are incredibly higher once you move north of 100,000 BTC.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.