Everything you wanted to know about Grayscale BTC Trust but were afraid to ask!

[Daltonik]

The SEC has submitted a response to the lawsuit filed by Grayscale Investments over the rejection of their application to convert the GBTC trust into a spot bitcoin ETF. The regulator considers the refusal justified because in their opinion spot and futures ETFs are fundamentally different products.

Source: https://grayscale.com/wp-content/uploads/2022/12/Reply-Brief-of-Respondent-SEC-12092022.pdf

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[franky1]

"bitcoin that would be held by greyscale ETP trade on concededly "unregulated" spot-trading platforms"

lets translate that

"we cant regulated a ETF because the asset will be traded on something unregulated"

thats like saying.
we cannot put cooked food on a plate because the plate has "no cooked" food on it

..
well regulators.. here is the thing
because bitcoin stored in coinbase vaults, is working as a commodity*
coinbase is regulated by CFTC in this manner. so the underlying asset is regulated

thus because CFTC regulate coinbase thus bitcoin. the SEC can then allow greyscale to have by SEC future approval regulated shares**..
by which .. by then regulating the shares**.. SEC can then regulate the OTC trading platform to then allow them to trade those shares

so the SEC can regulate greyscale and thus greyscales chosen market it wishes to trade on

*commodity(raw product used to create other products(collateralised shares**))

**shares(in $ format which is treated as $ equity/debt (securities))

EDIT

turns out....
via coinbase site

Coinbase, Inc. is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Coinbase, Inc. is not registered or licensed with the U.S. Securities and Exchange Commission or the U.S. Commodity Futures Trading Commission. View our licensing information here.

ok greyscale.. time to move your coins out and store into a wallet and thus business that can be regulated


i was first thinking that coinbase was regulated and the ball was stuck in SEC court for falsely denying things
turns out greyscales funds are locked in a business thats not regulated..

dang greyscale.. !! get your act together

[Daltonik]

I received a New Year's newsletter from Grayscale by email, which mainly concerns the actions of the company if the Court of Appeals of the District of Columbia decides not in favor of Grayscale. And as they write, if it fails to succeed in all possible courts as well and the company comes to the conclusion that there is no way to introduce legislative or regulatory clarity that would allow GBTC to be converted into an ETF in a reasonable time, then Grayscale will consider other options for returning part of GBTC's capital to shareholders such as a tender offer of 20% of GBTC's outstanding shares, but two separate permits must be obtained for this:
1.Granting by the SEC an exemption from certain requirements applicable to tender offers in order to ensure that the tender offer is fair to all investors.
2.Obtaining shareholder approval to amend the GBTC trust agreement.

https://grayscale.com/end-of-year-ceo-letter-to-investors-2022/

[franky1]

I received a New Year's newsletter from Grayscale by email,
https://grayscale.com/end-of-year-ceo-letter-to-investors-2022/

greyscale CEO speaks on video
https://www.youtube.com/watch?v=D3hI0p-_x2c

i reject the premiss that its hard to get audited financials done

https://www.youtube.com/watch?v=gdj5RWmQjnQ

well

the custodian cannot disclose such public keys to the sponsor, trust or any other individual or legal entity," page 94 section "Security of the Account" https://www.sec.gov/Archives/edgar/data/1588489/000119312517013693/d157414ds1.htm

"cannot disclose PUBLIC keys"
i call that a paradox of words

hey greyscale. coin base have the keys..
hey greyscale. not-your-keys-not-your-coin

by the way

of the $10b of assets. they have $5b of shares(50% discount)
if they fail to get acceptance to offer a ETF by spring, they can only afford to buy back 20% of shares
so they only have $1b of cashflow to buy out share holders that would want to leave if greyscale cant get a ETF

does not sound good

no wonder the CEO is on a speedy press tour writing letters and appearing on CNBC and yahoo finance on same day

usually if there is a no risk, (normal boring day activity) it does not need this rush to media activity

sorry greyscale but if you are offering an exit, allow 100% to exit not just 20%
YOUR SUPPOSE TO HAVE ENOUGH FUNDS TO COVER EVERY SHARE
now im sober. and able to run some numbers

so GBTC:
$10.5b asset locked (20%=$2.1b)
692,370,100 shares (20%=138,474,020)

ok so 1 share
share cost $8.13 (should Greyscale buy back)
collateral it unlocks $15.16

so if grey scale buys back 138,474,020 shares at a total cost of $1,125,793,782.60 they can then unlock
$2.1b of assets (20% of collateral)

[fillippone]

According to Bloomberg Valkyrie Investment is aiming to scoop up to 50% of GBTC shares, aiming at becoming the new GBTC sponsor:


Valkyrie Unveils Proposal for Grayscale’s Troubled Bitcoin Trust (GBTC)

(Bloomberg) -- Valkyrie Investments is out with a proposal for a much larger rival product: to become the new sponsor and manager of the crypto industry’s largest fund, the Grayscale Bitcoin trust.
The Nashville, Tennessee-based asset manager, which oversees roughly $180 million, on Friday announced the launch of the Valkyrie Opportunistic Fund, which seeks to take advantage of the massive discount in Grayscale Investments’ $10.5 billion product (GBTC). The Valkyrie fund will be increasing its holdings of GBTC, allowing the company to realize “the true value of the underlying Bitcoin for our investors,” which it says is a goal it will actively pursue on their behalf, according to the company.

I strongly doubt the move will be successful, but hopefully it will help closing the NAV discount as the is some sort of "soft commitment" by another "big swinging dick in the industry.

[franky1]

they seem a little busy preparing the 20% redemption triggered by the fir tree law suit last month

it is kind of sad that GBTC want to charge 2% fee for just holding onto peoples value, when it turns out greyscale is not actually even holding the value. (coinbase is).. but then coinbase and greyscale not allowing people to escape..

greyscale have shoddy terms about "we wont redeem unless sponsor allows" (THEY ARE THE SPONSOR!!)
so other companies want to buy out greyscale to be the sponsor to the change the terms and allow redemptions

greyscale is hoping a 20% redemption for those that want to escape would be enough to appease those that want to leave

however i perceive a race to exit of everyone causing a bank run where greyscale can only afford a 20% exit and everyone fighting for a 'ticket' to be only of the 20% first class leavers

[JayJuanGee]

According to Bloomberg Valkyrie Investment is aiming to scoop up to 50% of GBTC shares, aiming at becoming the new GBTC sponsor:
Valkyrie Unveils Proposal for Grayscale’s Troubled Bitcoin Trust (GBTC)

(Bloomberg) -- Valkyrie Investments is out with a proposal for a much larger rival product: to become the new sponsor and manager of the crypto industry’s largest fund, the Grayscale Bitcoin trust.
The Nashville, Tennessee-based asset manager, which oversees roughly $180 million, on Friday announced the launch of the Valkyrie Opportunistic Fund, which seeks to take advantage of the massive discount in Grayscale Investments’ $10.5 billion product (GBTC). The Valkyrie fund will be increasing its holdings of GBTC, allowing the company to realize “the true value of the underlying Bitcoin for our investors,” which it says is a goal it will actively pursue on their behalf, according to the company.

I strongly doubt the move will be successful, but hopefully it will help closing the NAV discount as the is some sort of "soft commitment" by another "big swinging dick in the industry.

On a superficial level, I do not understand the math.

How could a company that ONLY manages $180 million be able to scoop up 50% of a fund that is $10.5 billion.  It does not add up in my wee widdo pea-sized brain.  Am I thinking too small in regards to how $180 million can be used in such a way? 

[franky1]

On a superficial level, I do not understand the math.

How could a company that ONLY manages $180 million be able to scoop up 50% of a fund that is $10.5 billion.  It does not add up in my wee widdo pea-sized brain.  Am I thinking too small in regards to how $180 million can be used in such a way?  

valkerie is just a brand of a crypto business.. look beyond the brand and look at the people involved and the companies they are involved with

looking at their deal with seeking investors to get to a point of "buying out" 50%. we see some familiar names.. like using stonegate as the management team(administrators) which is involved in some of the blackrock, fidelity, DAG, stuff in the cryptoconomy

the nasty thing is....
valkeries "business address" (320 seven springs way brentwood) is a virtual address(modern po box)

if you are unable to find a real office address full of the physical supposed employee's to be able to physically slap them with a rotten fish if they do you wrong.. dont invest in them in the first place

i see this as another shell company 3 card shuffle of leaping out the boiling water and into a firepit

..
valkerie was a AI and data science company in 2019.. now suddenly being rebranded as a hedge fund.. operating via a virtual address with a rent-an-office..

yea be sceptical

[fillippone]

the nasty thing is....
valkeries "business address" (320 seven springs way brentwood) is a virtual address(modern po box)

When I said I doubted the move would be successful, I didn't expect that.

Regarding the capital, we know how fast money cn be poured into a vehicle. But regarding the virtual address, yes, this is a bad sign. Even if an investment vehicle don't need too much of an office space, this is not reassuring at all.

[franky1]

they were a AI and data science company just a couple years ago and now suddenly want to become a hedge fund... be very skeptical

yes they employed a few names that are known from other "finance" sectors(guggenheim) to appear legit. but if they cant even afford to lease a proper office and want to avoid showing their true location. stay far far away from them

never invest a "minimum $1m per investor" into a brand with no funding to even lease a proper office

[fillippone]

never invest a "minimum $1m per investor" into a brand with no funding to even lease a proper office

I didn't know the backstory of Valkyrie. Nothing wrong about changing the firm mission (Hey, did you hear Microstrategy is now a bitcoin company?).
But I do agree on the background check when required for investing. Dear old due diligence.

[franky1]

never invest a "minimum $1m per investor" into a brand with no funding to even lease a proper office

I didn't know the backstory of Valkyrie. Nothing wrong about changing the firm mission (Hey, did you hear Microstrategy is now a bitcoin company?).
But I do agree on the background check when required for investing. Dear old due diligence.

yes but Micheal Saylor is a proper ceo, proper business, he is not offering a hedge fund. he is investing his own business funds into crypto for his own business future prospects. and they have a real headquarters

however valkerie reminds me(my spidey sense is tingling) of them ICO scams a few years back, "hiring" known finance guys to appear in their "executives" section of 'about us' pages. but having no physical HQ or any of the standard pre-requisites of a hedge fund

Charlie Burgoyne founder of valkerie is not a fund manager guy.

i dont want to re-hash my gripes with greyscale, dcg, blockstream stuff over the last 7 years.. but swapping greyscale for valkerie is a escaping the boiling water to be stepping into the fire, in my opinion

[franky1]

in other news
the winklevi are getting very itchy feet trying to chase after DCG

https://twitter.com/cameron/status/1609913051427524608/photo/1
https://twitter.com/cameron/status/1609913051427524608/photo/2

[Kryptowerk]

in other news
the winklevi are getting very itchy feet trying to chase after DCG

https://twitter.com/cameron/status/1609913051427524608/photo/1
https://twitter.com/cameron/status/1609913051427524608/photo/2

Wow, this reads just like out of a movie script.
An open letter like this is truely a last resort to create public attention and further pressure.
Wonder how this will play out, but we usually know not well for the 300k-and some people affected.

[franky1]

this whole gemini ->genesis<->DCG<->greyscale
hop,skip, jump game of money shuffling to try paying one off with the other and hope to make some profit in the middle whilst exiting some customers at a loss.. is just ridiculous
along with the fir tree lawsuit of DCG-greyscale

it has caused the need for DCG to do a 20%($1b) buy back of shares to unlock $2b of assets
however DCG doesnt want to pull the trigger now. they want to wait out as much as possible for the "discount" so that they dont have to pay out as much on the shares to unlock more of the asset

you would have thought that after several years of running exchanges and financing stuff a venture firm like DCG will be streaming with 10's of billions of spare cash right now to handle any/all eventualities.. and yet they had to take out loans just to shuffle around their own debts and now have to do equity/collateral sell offs to then pay off loans

what would be worse is if DCG got coinbase to unlock $500m from GBTC stash first to then pay off 20% share holders. to then grab the other $1.5b that is then share unlocked.. as that is then a breach of the whole trust contract.. but i can see it happening which is why i feel coinbase is hesitant on showing coin reserve addresses publicly

[fillippone]

however DCG doesnt want to pull the trigger now. they want to wait out as much as possible for the "discount" so that they dont have to pay out as much on the shares to unlock more of the asset

Mah I have lost you here.
their incentive, when doing this kind of operation is for the discount to go down, not up.
They are offering to buy back a share at NAV level, irrespective of the market price.
They are paying 1 Bitcoin for every 1 bitcoin amount of shares, currently trading at roughly 0.5 bitcoin.
So they are spending 1 bitcoin whatever the market price. If market price is closer to 1 bitcoin (discount decrease) their final Mark to Market is less negative.

Either I didn't interpret your post correctly or I didn't get the whole operation correctly.

[franky1]

however DCG doesnt want to pull the trigger now. they want to wait out as much as possible for the "discount" so that they dont have to pay out as much on the shares to unlock more of the asset

Mah I have lost you here.
their incentive, when doing this kind of operation is for the discount to go down, not up.
They are offering to buy back a share at NAV level, irrespective of the market price.
They are paying 1 Bitcoin for every 1 bitcoin amount of shares, currently trading at roughly 0.5 bitcoin.
So they are spending 1 bitcoin whatever the market price. If market price is closer to 1 bitcoin (discount decrease) their final Mark to Market is less negative.

Either I didn't interpret your post correctly or I didn't get the whole operation correctly.

their reason to do this is to use less money to get the coin

imagine december was 50% discount
it means they have to pay $5.3b to do a 100% buyback,
     meaning a 0.53b 10% buyback for 1.06b worth of coin release to them
     meaning a 1.06b 20% buyback for 2.12b worth of coin release to them

if they can wait out for more discount.. say 55% discount, instead of paying out 1.06 for 2.12 release
they would only pay $4.77b to do a 100% buyback,
     meaning a 0.477b 10% buyback for 1.06b worth of coin release to them
     meaning a 0.954b 20% buyback for 2.12b worth of coin release to them

thus a better deal for them
if discount went up to 55%
instead of paying 1.06 they pay out 0.954
saving THEM $106million by waiting for 5% more discount

[fillippone]

however DCG doesnt want to pull the trigger now. they want to wait out as much as possible for the "discount" so that they dont have to pay out as much on the shares to unlock more of the asset

Mah I have lost you here.
their incentive, when doing this kind of operation is for the discount to go down, not up.
They are offering to buy back a share at NAV level, irrespective of the market price.
They are paying 1 Bitcoin for every 1 bitcoin amount of shares, currently trading at roughly 0.5 bitcoin.
So they are spending 1 bitcoin whatever the market price. If market price is closer to 1 bitcoin (discount decrease) their final Mark to Market is less negative.

Either I didn't interpret your post correctly or I didn't get the whole operation correctly.

their reason to do this is to use less money to get the coin

imagine december was 50% discount
it means they have to pay $5.3b to do a 100% buyback,
     meaning a 0.53b 10% buyback for 1.06b worth of coin release to them
     meaning a 1.06b 20% buyback for 2.12b worth of coin release to them

if they can wait out for more discount.. say 55% discount, instead of paying out 1.06 for 2.12 release
they would only pay $4.77b to do a 100% buyback,
     meaning a 0.477b 10% buyback for 1.06b worth of coin release to them
     meaning a 0.954b 20% buyback for 2.12b worth of coin release to them

thus a better deal for them
if discount went up to 55%
instead of paying 1.06 they pay out 0.954
saving THEM $106million by waiting for 5% more discount

I think this is not what they proposed.
They proposed a buyback paying the NAV, not the market share.
What’s the point of a buyback at market price? The holder of the share simply can sell on the market!
What they proposed doing is a buyback at NAV level, indeed paying an hefty 100% premium over market price.

[franky1]

when you give funds to grayscale.. you are not buying bitcoin..

you are buying shares in a trademark/company/brand. called "GTBC"

where by GBTC has ITS OWN collateral/stocks/ property OWNED BY GTBC
you have no ownership rights of the BTC held by GBTC. they own the BTC. you just own the shares. that deviate from the BTC due to many reasons GBTC decides
https://twitter.com/Grayscale/status/1593737745364652032

To be perfectly clear: the $BTC underlying Grayscale Bitcoin Trust are owned by $GBTC and $GBTC alone.

the btc are not owned by customers

analogy..
the gym equipment is owned by the fitness business. not the members of the gym.


https://grayscale.com/end-of-year-ceo-letter-to-investors-2022/

These options could include a tender offer for a portion of the outstanding shares of GBTC. We currently expect that such tender offer would be for no more than 20% of the outstanding shares of GBTC.

they are not selling their collateral. they are buying back the shares. at share value

[fillippone]

Cameron Winklevoss goes on with his power struggle with DCG. He’s now asking the board of directors asking to oust Barry Silbert.



He cites various accusations, without providing too much evidence.
I doubt action will follow. But the point of getting DCG out of the dirt it's flying over various exchanges nowadays.