Recently, Grayscale launched the Optimism Trust and the Lido Trust. Among its trust funds, SUI and ZEN also experienced pullbacks, but the upward momentum did not diminish. Are the trust funds launched by Grayscale a collection of blue-chip coins? Can they be profitable in the long run? This article takes you through the 26 cryptocurrency trusts currently launched by Grayscale and their investment returns.
Overview of Grayscale Cryptocurrency Trusts
Grayscale is a digital asset management company established in 2013, primarily offering various cryptocurrency trust funds aimed at providing investors with legal and regulated investment channels. As one of the largest crypto asset management companies in the world, it manages assets worth billions of dollars. As of now, Grayscale has launched 26 cryptocurrency trusts.
Grayscale trust funds are a series of cryptocurrency investment products offered by Grayscale, allowing investors to indirectly hold cryptocurrencies such as Bitcoin and Ethereum without directly purchasing and managing them. Each trust fund is linked to a specific cryptocurrency asset, such as the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE). Through these trust funds, investors can buy and sell shares of cryptocurrency assets in the public market just like investing in traditional stocks.
Besides single-asset trust funds, Grayscale's basket of cryptocurrencies also has strong investment reference significance. Currently, Grayscale's crypto trusts, excluding ETFs, mainly consist of three product cycles.
Private placement: Grayscale products will first be launched in a private placement format, allowing qualified investors to participate in cryptocurrency investments. The initial restriction period for private placements is one year. Currently, Grayscale Sui Trust, Grayscale Lido DAO Trust, and others are in this stage.
Public offering: A public offering market form that allows all investors to participate in cryptocurrency investments. However, due to the lack of a continuous buyback plan, publicly traded stocks may trade at prices above or below their underlying asset value. Currently, MANA, GLNK, DEFG, and others are in this stage.
SEC Report: Grayscale products are among the first to report to the SEC. The reporting requirements to the SEC will further enhance disclosure levels, provide greater transparency for investors, and subject the products to additional regulatory oversight. Currently, ETCG, ZCSH, HZEN, and others are in this stage.
In the long run, it is difficult to beat BTC.
The report claims that Grayscale had a significant impact on cryptocurrencies during the bull market from 2020 to 2021, during which it dramatically increased the asset scale of its Bitcoin Trust and brought a large number of institutional investors into the crypto space. Other cryptocurrencies launched by Grayscale during this period performed differently in the short term and are unlikely to outperform BTC in the long term.
To track the investment returns of Grayscale funds, I recorded the token prices at the launch of the Grayscale trust and the token prices on December 23, and created the above chart. Timing-wise, Grayscale launched cryptocurrency trust products in 2018 and 2021, mostly during the peaks or later stages of bull markets. This phenomenon may relate to the relatively long cycle required for Grayscale to launch funds and the relatively mature market. In December of this year, Grayscale began to focus on launching trust funds; will it break the short-term high cycle this time?
In terms of investment returns, in the long run, only about 48% of tokens (including BTC and ETH) can generate positive investment returns, which is lower than the 50% probability of randomly flipping a coin, and their investment returns are far below BTC, showing a negative EV in the long run.
In the short term, the tokens launched by Grayscale did have some brilliant moments, but most of them occurred before listing. XRP has not yet broken its previous high after a strong rebound, and ZEN barely maintains an 18% investment return after three consecutive days of increase. Although some star tokens also reached highs after listing, from a long-term annualized perspective, their returns after a holding period of seven years were even below 10%. However, different entry timing has a more significant impact on investment returns. If Grayscale's concept tokens are accumulated at the bottom during a bear market, they can almost always outperform the average increase during a bull market, as there are no obvious changes in the targets at this time, and a good increase may come next year.
The tokens held by Grayscale have different indicative roles at different points in the cycle, and in this sense, Grayscale's selective process does exist.
