Protos | Nov 23, 2022
The Grayscale Bitcoin Trust (GBTC) is an over-the-counter (OTC) traded fund meant to track the price of bitcoin. Grayscale Investments is owned by Barry Silbert’s crypto mammoth Digital Currency Group (DCG), which also owns beleaguered crypto trading and lending firm Genesis.
- For a long time, GBTC traded at a significant premium to its NAV, with shares trading for as much as double the value of the corresponding bitcoin. While this premium persisted, institutional investors were incentivized to lock up bitcoins and receive GBTC shares, which they hoped to sell once the six month period elapsed. However, this trade become popular among a variety of firms, including BlockFi and Three Arrows Capital (3AC). As shares began to unlock, GBTC eventually started trading at a discount to NAV. This became particularly challenging for BlockFi, which had lent 3AC money against GBTC collateral.
- Eventually, 3AC was liquidated by BlockFi, which meant increased selling of GBTC into the market, further raising the discount. Currently, GBTC trades at around a 45% discount to NAV.
- Grayscale will not share proof of reserves
See: Grayscale Sues SEC” href=”https://ncfacanada.org/sec-rejects-bid-to-turn-the-largest-bitcoin-fund-into-an-etf-grayscale-sues-sec/”>SEC Rejects Bid to Turn the Largest Bitcoin Fund Into an ETF -> Grayscale Sues SEC
- Fundraising: DCG, the parent company for both beleaguered Genesis Trading and Grayscale, is reportedly fundraising to help shore up the books of Genesis.
- If Grayscale Investments withdraws as sponsor for GBTC, then the remaining shareholders have 90 days to find a new sponsor or the trust will terminate. If the trust is forced to liquidate, the bitcoin will be sold “as promptly as possible while obtaining the best fair value possible.” Cash proceeds will be distributed pro-rata to shareholders.
- GBTC currently has 644,000 bitcoin. Those who purchased at a significant discount could potentially make money, but that depends on how this sale of bitcoins would affect the market price for bitcoin.
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- Source: https://ncfacanada.org/grayscale-bitcoin-trust-is-fundraising-to-shore-up-the-books-of-genesis/