On-chain analysis firm Arkham has identified Grayscale as the world’s 2nd largest Bitcoin (BTC) holder through its GBTC investment product. With the equivalent of nearly 3.22% of all Bitcoins in existence, this raises questions about a lack of decentralisation.
Grayscale’s Bitcoin Trust fund represents 627,779 BTC
Last week, Arkham had already identified Grayscale as the second largest ETH holder through its Grayscale Ethereum Trust (ETHE) product.
This week, the on-chain analytics firm also highlighted that the asset manager was also the second largest holder of Bitcoin (BTC), through the Grayscale Bitcoin Trust (GBTC):
Breaking: Arkham has identified the Grayscale Bitcoin Trust’s holdings on chain.
It is the 2nd largest BTC entity globally, holding ☻$16B of BTC.
Though Grayscale publicly reports balances, they have refused to identify the on-chain addresses of the trust. https://t.co/uEN4kNldpm pic.twitter.com/p9GfrthoKR
– Arkham (@ArkhamIntel) September 6, 2023
In total, there are 627,779 BTC in Grayscale’s various portfolios, with a total value of $16.2 billion, which is consistent with the amount announced on the GBTC trading page.
In November 2022, just as the FTX storm was beginning, a wind of mistrust was blowing through the ecosystem, with numerous rumours accusing various players here and there of hypothetical insolvencies. While the famous proof of reserve was on everyone’s lips, Grayscale spoke out in defence of its wish not to communicate its addresses publicly, citing security reasons.
Despite this decision, the Arkham teams’ investigations led them to identify more than 1,750 addresses, each with less than 1,000 BTC.
Nearly 3.22% of supply
With so many BTC under its control, Grayscale has its hands on almost 3.22% of all bitcoins in circulation, which is 4.1 times more than MicroStrategy, which holds 152,800 BTC.
Nevertheless, the major difference between Grayscale and MicroStrategy is that the latter holds Bitcoin for its own account, whereas the fund manager does so for an investment product intended for its clients. Even so, this raises questions about a lack of decentralisation.
This was already the case with centralised cryptocurrency exchanges, but it’s important to realise that as the ecosystem develops, this is a trend that will become increasingly prevalent.
Indeed, it seems inevitable that spot ETFs on Bitcoin will end up being accepted sooner or later in the US, which should bring a significant flow of capital. The downside is that, in order to take on this liquidity, the few institutional players offering such ETFs will have to hold equivalent reserves of BTC, either in self-custody or via strategic partners.
It will therefore come as no surprise if the trend towards crypto-currencies being concentrated in the hands of a few entities becomes more pronounced. At the same time, on-chain analysis, as Arkham is demonstrating today, is bringing a level of transparency hitherto unseen in the world of finance.
