Grayscale Hits $20 billion in AUM as Bitcoin's Price Goes Wild

Crypto fund manager Grayscale closed 2020 with a cool $20 billion under its wings. The asset manager, whose publicly-traded funds offer investors the opportunity (with several hefty caveats) to trade crypto on the stock market, has increased its holdings by ten times since the start of 2020.

“Here's to another 10x in 2021!  Happy new year everybody,” tweeted CEO Barry Silbert.

Most of Grayscale’s funds—some $17.4 billion—are in the Grayscale Bitcoin Trust. And Bitcoin’s rising price helped Grayscale hit $20 billion before the new year. Bitcoin hit a new all-time high on New Year’s Eve of just over $29,000. 

One of the most surprising purchases that tipped Grayscale  over the edge for the new year was XRP, the coin whose price went splat last month after the US Securities and Exchange Commission slapped a lawsuit against XRP’s creators. 

According to the derivatives analytics platform, bybt, Grayscale’s XRP holdings increased from 35.65 million on December 28 to 38.88 million on December 31. And the price of XRP, too, bumped up an extra two cents to $0.23. This marks an increase of $0.67 million.

Grayscale's trusts function like this: private investors invest lots of (fiat) money in its funds, which Grayscale then uses to buy cryptocurrencies. Grayscale then lists the funds on the stock market; share prices track the price of the cryptocurrency the funds have purchased—albeit at a premium, in part due to Grayscale’s management fees.

Currently, the Grayscale Bitcoin Trust trades at a 17% premium, according to data from derivatives market analysis firm bybt. Its Litecoin Trust trades at a 2378% premium. 

The advantage is that trusts like Grayscale’s are one of the only ways to trade crypto on the stock market, which is useful for people wanting to trade from tax-sheltered accounts. Grayscale’s second-largest trust is the Grayscale Ethereum Trust, which has $2.175 billion locked up in it.