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Nasdaq-listed MicroStrategy announced Friday that it had purchased an additional 314 bitcoin for $10 million in cash.

This brings MicroStrategy’s total bitcoin holdings to 70,784 bitcoin, worth more than $2.28 billion at current prices. 

The company’s bitcoin bet appears to have paid off well so far. MicroStrategy acquired these bitcoins at an aggregate purchase price of around $1.2 billion and an average purchase price of approximately $16,035 per bitcoin. Currently, bitcoin’s price is trading at around $32,300.

MicroStrategy made its first bitcoin purchase in August last year. At the time, the company’s CEO Michael Saylor said, bitcoin investments are part of a new capital allocation strategy for maximizing long-term value for shareholders. 

Later, in an interview with The Block, Saylor said bitcoin is the “best money ever created.” Saylor compared bitcoin to gold and the U.S. dollar and said the cryptocurrency is a superior asset for a treasury given it is not deflationary by design.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• High Ethereum gas price leads to an increase in gas tokens’ popularity.
• The CHI token from 1inch is most often used, despite its primary users being on-chain arbitrageurs.
• The amount of gas used in transactions to obtain a gas refund in the future is less than one percent of the total gas used.
• There are both ordinary speculators on the gas tokens market, expecting a doubling in the gas price for break-even, and arbitrage bots.

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Grayscale Bitcoin Trust (GBTC) product’s premium has fallen below 5% from about 40% a month ago, according to data tracked by The Block.

The current premium stands at about 3%. The sharp fall in GBTC’s premium suggests that some large investors might be cashing out their gains or just arbitraging premiums away.

GBTC is a trust product and its shares are traded on over-the-counter (OTC) secondary markets. But accredited investors who invest in GBTC shares at net asset value (NAV) can sell their shares only after a six-month lockup period, according to private placement rules in the U.S. by the Securities and Exchange Commission (SEC).

GBTC used to have a 12-month lockup period until last year, before it became an SEC reporting company in January 2020. The reporting company status allowed GBTC’s accredited investors, who own or purchase its shares from private placements, to have an earlier liquidity opportunity.

It is possible that some accredited investors who bought GBTC shares about six months ago may have sold their shares now and hence the drop in its premium.

Last June, crypto hedge fund Three Arrows Capital bought over 21 million shares of GBTC, worth nearly $260 million at the time. It is not clear whether the fund has sold its shares now, its co-founder Kyle Davies declined to comment when reached.

Premiums in trust products like GBTC exist because they don’t have a redemption program like exchange-traded funds (ETFs), due to regulatory prohibitions. That means large investors have no other option but to wait for either six months or a year to sell their shares, explaining volatility in premiums of such products.

GBTC is the largest bitcoin trust product worldwide. It manages $21 billion worth of assets. Across its products, Grayscale has a total AUM of more than $25 billion.

Just last week, GBTC issued new shares worth $1.28 billion, representing 35,159 bitcoins. It reflects the massive demand the product has.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.