Silicon Investor - GBTC: Bitcoin Investment Trust (Not an ETF) OTC:QX

[SGJ] Hold on to those BTC's twitter.com twitter.com

SGJ — 3/14/2024 8:31:18 AM

[Madharry] i just own fbtc. and thats probably what I will stick with. so far thats been t...

Madharry — 2/29/2024 12:08:44 PM

i just own fbtc. and thats probably what I will stick with. so far thats been the best performing speculation in my portfolio. I believe that in the event that they get hacked fidelity will compensate investors. I dont have that confidence in the miners.

[FIFO_kid2] I think that is a excellent strategy value averaging. As for what you should do...

FIFO_kid2 — 2/29/2024 11:15:21 AM

I think that is a excellent strategy value averaging.

As for what you should do. In this recent bull/bear cycle comparing the alpha in the miners vs the trusts has been in favor of the trusts so at this juncture I think buying bitcoin at a discount to NAV is the better move as the costs to mine it are much greater than the management fees you incur at GBTC or OBTC.

With that said I really don't think the entire sector will benefit equally. I think we are at the point where the miners are just shorter term trading sardines. In order to continue mining they will have to either consolidate or massively dilute their share base at a much greater rate than bitcoin itself which is minimal in order to continue to mine it.

[Madharry] I suspect that if many investors even put 2% of their portfolio in some form of ...

Madharry — 2/29/2024 12:22:40 AM

I suspect that if many investors even put 2% of their portfolio in some form of bitcoin it would keep shooting upward. I am thinking of setting that as my criteria and and taking a small distribution every quarter if it exceeds that percentage.

[FIFO_kid2] Madharry- GBTC was the among the best calls for early 2023 on the value board wh...

FIFO_kid2 — 2/28/2024 12:43:28 PM

Madharry- GBTC was the among the best calls for early 2023 on the value board when you said it was trading at 50% below its NAV. Thank you and very much proves something that is perceived as speculative or a company that possesses decent news flow without any reward can still exhibit relative value which is a different approach than just looking at its accounting numbers.

FWIW I recently swapped a portion of it into thinly traded OBTC since it is still trading at a pretty significant NAV discount relative to GBTC.

I think the recent big run up here is related to the halving of the hash rate in approximately 1 month so the price has to be higher or the miners will struggle to exist. However, that looks like a potential culminating catalyst for some profit taking your gains.

Another strategy is to short the miners with the worst hash rates and go long BTC or equivalent.

Since for many BTC is perceived by many as digital gold and usually 5% is the answer for gold as a hedge I would say that the combination of gold and BTC should be that figure.

[Madharry] I moved my gbtc to fbtc as well about 5 days after fbtc started trading. seems ...

Madharry — 2/28/2024 10:22:56 AM

I moved my gbtc to fbtc as well about 5 days after fbtc started trading. seems surprising that during a 50% runup not comments on this thread. Anyone wants to comment on how big a percentage bitcoin should be of ones portfolio?

[SGJ] The fee. The others are fee free. Taxes were not a factor. Have no idea how th...

SGJ — 2/1/2024 2:02:03 PM

The fee. The others are fee free. Taxes were not a factor. Have no idea how they audit. I know Coinbase is where they keep them.

[Elroy] Why did you do that? On a different note...... Does anyone know how often (or ...

Elroy — 2/1/2024 12:15:34 PM

Why did you do that?

On a different note......

Does anyone know how often (or how?) GBTC proves that it owns the Bitcoin that it claims to own?

[SGJ] I rolled out of GBTC and into BITO and FBTC

SGJ — 2/1/2024 11:28:25 AM

[Elroy] The problem with this view is tax. Lots of people have HUGE capital gains in GB...

Elroy — 1/12/2024 9:19:26 AM

The problem with this view is tax. Lots of people have HUGE capital gains in GBTC. Sell it to get a lower priced spot Bitcoin ETF, and you've gotta pay taxes on capital gains.

[Ron] Would you pay $150 a year for something you could get for free? That's exactly w...

Ron — 1/12/2024 9:01:45 AM

Would you pay $150 a year for something you could get for free? That's exactly what some bitcoin ETF investors are doing.
investors.com

[Elroy] Q&A: What Converting GBTC to an ETF Would Mean grayscale.com The article says ...

Elroy — 1/11/2024 11:11:55 AM

Q&A: What Converting GBTC to an ETF Would Mean

grayscale.com

The article says GBTC's bitcoin is held offline in cold storatge.
I wonder how often and by whom this is confirmed?

[Ron] Adding DEFI BITS BTF XBTF FBTC to bitcoin list IBIT appears to have biggest vol...

Ron — 1/11/2024 11:05:32 AM

Adding DEFI BITS BTF XBTF FBTC to bitcoin list
IBIT appears to have biggest volume so far...

[Elroy] Ok. There must be some way that GBTC proves it holds the Bitcoin that it claims...

Elroy — 1/11/2024 10:27:49 AM

Ok.

There must be some way that GBTC proves it holds the Bitcoin that it claims to hold, but I don't know what that is. Since hacks seem so common with Bitcoin, I'm sure that the thieves are constantly trying to hack GBTC.

I also wonder how Coinbase proves it's Bitcoin holdings?

[Ron] No idea. I have those ETFs including GBTC in a watch list to see how they behav...

Ron — 1/11/2024 10:20:34 AM

No idea. I have those ETFs including GBTC in a watch list to see how they behave.
I would think there would need to be reports filed...

[Elroy] Does anyone have a quick easy explanation of how GBTC behaves differently when i...

Elroy — 1/11/2024 9:57:24 AM

Does anyone have a quick easy explanation of how GBTC behaves differently when it's an ETF rather than a trust.

I think as a trust it's like a closed end fund. It has the Bitcoin assets, but the share price of GBTC is determined by the market, and there's nothing that fixes the GBTC price to the value of the underlying Bitcoin. This is why GBTC has at times had large premiums and discounts.

When it's an ETF........what is it that locks the GBTC ETF share price closer to the actual price of the bitcoin assets which it holds? An easy explanation?

-----

On a different note, does anyone know what GBTC does (ignoring the ETF thing) to assure the market that it actually holds the number of Bitcoin it claims to hold? In other words, how do we know it wasn't hacked and all the bitcoin stolen 2 years ago?

[Ron] Looks like it, yes. List of etfs so far: ARKB BITB FBTC EZBC GBTC DEFI BTCO IB...

Ron — 1/11/2024 9:37:50 AM

Looks like it, yes. List of etfs so far: ARKB BITB FBTC EZBC GBTC DEFI BTCO IBIT BRRR HODL BTCW

[Elroy] Grayscale Investments® Receives SEC Approval to Uplist Grayscale Bitcoin Trust t...

Elroy — 1/10/2024 5:16:59 PM

Grayscale Investments® Receives SEC Approval to Uplist Grayscale Bitcoin Trust to NYSE Arca as Spot Bitcoin ETF

finance.yahoo.com

Isn't this the big news that everyone has been waiting for?

[SGJ] Still some discount available in both GBTC and ETHE docs.google.com

SGJ — 1/9/2024 8:45:42 AM

[Madharry] re liquidation: schwabassetmanagement.com

Madharry — 11/26/2023 1:00:24 PM

[Madharry] I will be happy to address your questions to the best of my ability. Initially ...

Madharry — 11/26/2023 12:50:46 PM

I will be happy to address your questions to the best of my ability. Initially GBTC was attractive to large investors because they had agreements with GBTC that whenever they wanted GBTC would redeem their shares with bitcoin equivalent. when the fund shares started to sell at a discount that is what large investors tried to do but the SEC prevented that from happening because it said that would make GBTC act like an ETF but it was not licensed to do so. so there is no arbitrage possibility until GBTC becomes an ETF. then large investors can exchange their shares for actual bitcoin if they choose.

[Elroy] the idea is if there is a significant premium people will sell the etf shares an...

Elroy — 11/26/2023 11:32:39 AM

the idea is if there is a significant premium people will sell the etf shares and buy bitcoin outright. if there is a discount it will make sense for people to buy the etf and then make demand for the company to transfer bitcoin to them directly.

Where are you coming up with this stuff?

The arbitrage ability didn't cause GBTC to track the price of it's underlying assets. What is there in an ETF that causes the ETF to track the underlying assets more closely than GBTC tracked it's underlying assets?

it will make sense for people to buy the etf and then make demand for the company to transfer bitcoin to them directly.

Huh? With an ETF can a holder of the ETF demand that the company (you mean the ETF manager??) transfer the underlying asset to the holder directly?

it will have to be priced competitively or people will just liquidate.

What does it mean to "liquidate" an ETF? I thought it was like a stock that you buy or sell?

[Madharry] the idea is if there is a significant premium people will sell the etf shares a...

Madharry — 11/26/2023 4:34:31 AM

the idea is if there is a significant premium people will sell the etf shares and buy bitcoin outright. if there is a discount it will make sense for people to buy the etf and then make demand for the company to transfer bitcoin to them directly. so there is likely to be very lil premium or discount once the etf becomes real. of course i am not sure what the new managment fee will be for the etf going forward but it will have to be priced competitively or people will just liquidate.

[Elroy] So the ETF shares track the price of bitcoins as closely as possible, and the ET...

Elroy — 11/24/2023 12:28:04 PM

So the ETF shares track the price of bitcoins as closely as possible, and the ETF occasionally rebalances its holdings by buying or selling tokens.

Occassionally? Tokens?

This process of creation and redemption is done by authorized participants (APs). These are typically large financial institutions, which create or redeem shares of the ETF based on market demand. If the ETF shares are trading at a premium or discount to the actual price of bitcoins, then the APs create or redeem ETF shares in large blocks, essentially arbitraging the difference so that the ETF share price alignments with the cost of bitcoins.

Hmmm, it's not 100% clear how this works.

If the ETF trades at a premium to the price of Bitcoin, then.......AP's create more shares in the ETF? How? Magic?

That explanation perhaps explains something, but I still don't quite get it.

Presumably there are multiple AP's (large financial institution) who....ensure the price per unit of the ETF stays close to (the price of Bitcoin x the number of Bitcoin held by the ETF / the number of ETF units issued)?

So market makes (AP's) in the ETF use arbitrage to ensure the ETF is fairly priced. But how? Not quite clear to me....

[FIFO_kid2] My assumption it would operate like this. investopedia.com

FIFO_kid2 — 11/24/2023 11:14:32 AM

[Elroy] If GBTC converts into an ETF, does anyone know the simple explanation for what t...

Elroy — 11/24/2023 8:09:28 AM

If GBTC converts into an ETF, does anyone know the simple explanation for what that means for GBTC's operations?

With GBTC as an ETF, if someone buys $10 million of GBTC does it mean that GBTC must immediately go into a crypto exchange and buy $10 million actual bitcoin, and vice versa when someone sells GBTC? So the price of the GBTC ETF must always equal the GBTC NAV, and the price of GBTC moves almost identically to Bitcoin's price movements, and the number of bitcoin held by GBTC must flucture with each buy and sell?

Is that understanding of the GBTC ETC conversion correct?

[Glenn Petersen] GBTC’s discount to NAV drops to sub-10% territory for the first time in two year...

Glenn Petersen — 11/24/2023 6:28:44 AM

GBTC’s discount to NAV drops to sub-10% territory for the first time in two years

by James Hunt
The Block
NOVEMBER 23, 2023, 6:11AM EST
Published 1 MINUTE EARLIER on

QUICK TAKE

The Grayscale Bitcoin Trust (GBTC) discount to net asset value (NAV) has fallen below 10% for the first time since July 2021.
The discount hit -9.77% yesterday, coinciding with Cathie Wood’s Ark Invest selling more than $2 million worth of GBTC shares over the past two days.

Trust discount or premium to net asset value (NAV) has fallen below 10% for the first time in over two years.

This metric indicates how much lower the market price of each share is compared to the value of the bitcoin it represents. It fell to -9.77% by market close yesterday, the lowest level since July 2021, according to YCharts data.

The Grayscale Bitcoin Trust trades at a discount because the shares cannot currently be redeemed, meaning the only option for shareholders is to sell them to other prospective buyers. However, it historically traded at a premium until a crypto credit crunch in 2021.

GBTC discount to NAV. Image: YCharts.
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At the time, JPMorgan analysts attributed the collapse into discount territory to a combination of institutional investors selling GBTC to monetize the premium and the launch of new bitcoin exchange-traded funds in Canada.

As of the market close yesterday, the Grayscale Bitcoin Trust shares were trading at $30.45. The Grayscale Bitcoin Trust is up approximately +25% over the past month following the Securities and Exchange Commission’s decision not to appeal the ruling involving Grayscale’s attempt to convert its flagship fund into a spot bitcoin ETF.

GBTC/USD price chart. Image: YCharts.
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The narrowing trend — seeing the discount shrink from over -40% before BlackRock and others filed spot bitcoin ETF applications in June — is likely a sign of increased optimism the SEC will approve a spot bitcoin ETF in the U.S., including the potential conversion of GBTC. The SEC met with Grayscale and BlackRock over their spot bitcoin ETF filings earlier this week.

GBTC’s discount to NAV drops to sub-10% territory for the first time in two years | The Block

[Elroy] Most Bitcoin ATM transaction fees range between 5% and 15%. What in the world i...

Elroy — 9/18/2023 3:09:20 PM

Most Bitcoin ATM transaction fees range between 5% and 15%.

What in the world is the reason why anyone would want to buy Bitcoin from an ATM? It's a moronic idea.....

[Glenn Petersen] Bitcoin rallies more than 7% as court sides with Grayscale over the SEC in crypt...

Glenn Petersen — 8/30/2023 7:35:48 AM

Bitcoin rallies more than 7% as court sides with Grayscale over the SEC in crypto ETF case

PUBLISHED TUE, AUG 29 202311:03 AM EDT
UPDATED 28 MIN AGO
Tanaya Macheel @TANAYAMACHEEL
CNBC.com

The price of bitcoin surged Tuesday after the U.S. Court of Appeals for the DC Circuit ruled that the Securities and Exchange Commission was wrong to deny crypto investment giant Grayscale permission to convert its popular bitcoin trust into an ETF.

Bitcoin jumped about 7.5% following the ruling to $27,911.67, according to Coin Metrics. The move lifted cryptocurrencies broadly as well as crypto equities higher.

Grayscale’s lawsuit against the SEC has been closely watched by investors and other industry participants as a key catalyst that would shake up a market marred by low volatility and liquidity. Earlier this month bitcoin trading volatility fell to its lowest level in more than four years as investors had been waiting on the sidelines for more regulatory clarity on crypto activity – whether through new legislation out of Congress or through the ability to launch a spot bitcoin ETF.

Several bitcoin futures ETFs have already been approved in the U.S.

“The denial of Grayscale’s proposal was arbitrary and capricious ... The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP,” the court said in the ruling. “In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful. We therefore grant Grayscale’s petition for review and vacate the Commission’s order.”

Tuesday’s ruling may increase the chances that the SEC will approve other bitcoin ETF applications – including that of BlackRock, whose filing in late June drove one of bitcoin’s big rallies this year, as well as Fidelity, WisdomTree, VanEck and Invesco and others. A U.S. bitcoin ETF would provide a way to get exposure to bitcoin without having to hold it, which would invite retail and institutional investors as well as wealth managers into the market.

A spokesperson for the SEC said it’s “reviewing the court’s decision to determine next steps.”

“Today’s decision reaffirms that a bitcoin ETF in the U.S. is a matter of when, not if,” said Steve Kurz, Global Head of Asset Management at Galaxy, which filed with Invesco for its bitcoin ETF. “In order for digital assets to continue to flourish, they must be accessible to all investors. We believe that the ETF structure can enable greater access to and transparency across cryptocurrency investing, and truly help further democratize the asset class.”

The ruling also comes as a relief to many crypto market participants who have been frustrated by the SEC, particularly under Chair Gary Gensler, and its insistence on regulating by enforcement. The crypto industry has long sought out clarity in rules businesses can play by to establish and build long-lasting, compliant companies. The U.S. regulatory crackdown on crypto in 2023 — which includes and SEC enforcements and a lawsuit against the biggest U.S. crypto exchange — Coinbase, has been a dark cloud over the market.

Grayscale initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its bitcoin trust, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.

The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about market manipulation and investor protections.

The Grayscale Bitcoin Trust itself jumped 16%.

—CNBC’s Jesse Pound contributed reporting.

Bitcoin rallies more than 7% as court sides with Grayscale over the SEC in crypto ETF case (cnbc.com)

[nicewatch] The SEC hasn't been rational in their decision making in decades and are chronic...

nicewatch — 4/16/2023 2:31:30 AM

The SEC hasn't been rational in their decision making in decades and are chronically understaffed to take on the kind of trading crimes they are purportedly tasked to enforce by law. So a lot of their high profile legal maneuvers appear to show political bias depending on the current administration.

The BTC quotes you see on TV or your broker page are using an exchange, a composite of major exchange prices, or some other type of cash based index of exchanges.

There are way too many ETFs and ETNs out there, imo. BTC isn't going away but if you're purely a paper-pusher of BTC as opposed to actually holding your own keys and coins, there are plenty of ways to play the price movements of BTC and each have their tradeoffs. Will keep it simple and stick to entities that mostly reflect the fluctuation in BTC aside from GBTC. There is OBTC and MSTR. There are listed futures, and perpetual futures on shadier offshore entities that more resemble bucket shops. Would never recommend the latter two to anyone but have used them all well over the years.

[nicewatch] Sorry I missed your reply or would have responded sooner. Bitcoin isn't going ...

nicewatch — 4/16/2023 1:52:35 AM

Sorry I missed your reply or would have responded sooner.

Bitcoin isn't going away anytime soon and unaware of anyone taken seriously in the field arguing otherwise. There's always healthy debate, and speculation, about which names will fill the #2 to #20 or #30, etc. spaces by marketcap value as well there should be. Bitcoin was the first and still the dominant name.

People and entities have moved more to bitcoin, as defined by the 2020 to late 2021 bull market.

As for AT1 bonds, my recollection is Asian entities, banks, funds, sovereign wealth funds, etc. took the brunt of the hit. PIMCO had a several hundred million$ write off. As for who holds AT1 bonds issued by other firms I don't know but am sure someone made a list in reaction to the AT1 crash and burn on Credit Suisse paper.

[Madharry] I think the sec position re gbtc for not allowing it to be an etf is nigh inde...

Madharry — 4/13/2023 7:21:19 PM

I think the sec position re gbtc for not allowing it to be an etf is nigh indefensible. given that numerous respectable financial entities are quoting real time price for bitcoin unlike numerous stocks that trade by appointment only yet etfs are allowed to purchase them and hold them in their portfolios. it was actually the sec that did not permit ftx to take their bitcoin out of gbtc.

[SGJ] Yes, I got totally out of GBTC at 10, thinking it was going to have problems ass...

SGJ — 4/13/2023 5:10:14 PM

Yes, I got totally out of GBTC at 10, thinking it was going to have problems associated with the SI disaster, and still do. Have taken it off my trade/invest list, although it has traded like there is no problem. Still have my bitcoin though.

[Madharry] this thread is quiet considering how well gbtc and bitcoin have done of late. I...

Madharry — 4/10/2023 10:48:12 AM

this thread is quiet considering how well gbtc and bitcoin have done of late. I wonder how long it will take before bitcoin becomes an accepted form of payment. 5 years?

[Madharry] I think that there is some degree or respectability build around bitcoin as comp...

Madharry — 3/20/2023 6:14:45 AM

I think that there is some degree or respectability build around bitcoin as compared to other crypto stuff and there is less fear about its being stolen so I suspect more people and entities are willing to commit a % of their assets to it. Now I wonder when the next shoe will drop about this AT1 bonds that I had never heard off until the weekend. Apparently Credit Suisse issued around $17 billion and there were something like $275 billion issued. I wonder who owns them? Insurance companies? Pension funds? Sovereign funds? Other banks?

[nicewatch] You'd have to more specific by citing timelines of your claims. As stated it kin...

nicewatch — 3/4/2023 3:51:54 PM

You'd have to more specific by citing timelines of your claims. As stated it kind of reads like a non sequitur.

For many years bitcoin was touted as an uncorrelated asset and an inflation hedge, then when its use as a transactional medium never materialized and became more of a volatile speculative vehicle the meme of a type of digital gold or store of value arose.

Imo, there are two main catalysts since the 2020 lows that made bitcoin more correlated and less of a "hedge". While everyone now knows about the halving cycle of the difficulty of "mining" bitcoin, the huge amount of liquidity injected into the markets and the economy by the Fed and Treasury during the early phase of the Covid pandemic goosed all speculative assets, so bitcoin responded just as tech stocks did or gold, or beachfront condos, etc.

Also I think the move from 2020 lows in bitcoin had much more investment and adoption by traditional wall street firms and other large asset managers than prior bitcoin bull cycles. Fidelity, Goldman, etc. This wasn't all directly buying bitcoin but investing in crypto startups and other parts of the ecosystem. Of course there was a huge boom in crypto dedicated hedge funds but it takes a lot of $30-100 million funds to amount to firms like Vanguard and Fidelity that manage trillions declaring that they are looking to allocate a few % into crypto based investments.

Imo those two factors, especially the increased involvement by wall street firms and large mainline asset managers made bitcoin more correlated to stocks than in prior cycles. The chart of bitcoin from the 2020 low to the late 2021 high and the proceeding large correction in 2022 rhymes with what a lot of the biggest gaining then correcting tech stocks did over the same period. fwiw.

[Doren] Interestingly Bitcoin used to sell in parity with the stock markets even though ...

Doren — 3/3/2023 1:39:04 PM

Interestingly Bitcoin used to sell in parity with the stock markets even though it's supposedly a hedge...

just lately it's been acting like a hedge...

Wonder why?

[Doren] Binance will suspend U.S. dollar transfers Swindles a plenty.

Doren — 2/6/2023 8:03:21 PM

[SGJ] One needs to separate BTC from the FTX disaster. BTC is going to be fine. GBTC...

SGJ — 1/19/2023 9:13:45 AM

One needs to separate BTC from the FTX disaster. BTC is going to be fine. GBTC though, since its tied to DCG, is risk off right now imo.

[nicewatch] Crypto Firm Genesis Is Preparing to File for Bankruptcy Rachel Butt and Olga Kh...

nicewatch — 1/18/2023 5:16:05 PM

Crypto Firm Genesis Is Preparing to File for Bankruptcy

Rachel Butt and Olga Kharif
Wed, January 18, 2023 at 7:37 PM GMT+1

(Bloomberg) -- Genesis Global Capital is laying the groundwork for a bankruptcy filing as soon as this week, according to people with knowledge of the situation.

The cryptocurrency lending unit of Digital Currency Group has been in confidential negotiations with various creditor groups amid a liquidity crunch. It has warned that it may need to file for bankruptcy if it fails to raise cash, Bloomberg previously reported.

Representatives at Genesis Global Capital didn’t immediately respond to requests for comment. A representative for DCG declined to comment. Talks are ongoing and plans could change, the people added.

Financial pressure at Barry Silbert’s DCG began to emerge after the collapse of hedge fund Three Arrows Capital. Genesis suspended withdrawals in November, soon after crypto exchange FTX — where Genesis held some of its funds — filed for bankruptcy. The failures have had ripple effects on crypto exchange Gemini Trust, run by Cameron and Tyler Winklevoss. Gemini Earn — a service that let Gemini’s users get yield for lending out their coins through Genesis — stopped redemptions as well.

Creditors, Genesis and DCG exchanged several proposals, but have so far failed to come to an agreement, the people said. Kirkland & Ellis and Proskauer Rose have been advising groups of creditors.

DCG told shareholders that it’s suspending quarterly dividends in an effort to conserve cash, according to a Jan. 17 letter to shareholders seen by Bloomberg.

finance.yahoo.com

[SGJ] Good update. Thanks.

SGJ — 12/30/2022 12:24:32 PM

[SGJ] Presently, the implied value of BTC is scarcity. Its utility is as a tax haven ...

SGJ — 12/30/2022 12:09:37 PM

Presently, the implied value of BTC is scarcity. Its utility is as a tax haven and transaction anonymity. There here exists a vehicle to hold value, mostly anon, for which a significant global market exists.

[SGJ] Yeah, look how long the US$ has lasted.

SGJ — 12/30/2022 12:04:43 PM

[nicewatch] It's hard to see the ETF conversion happening anytime soon as they've been tryin...

nicewatch — 12/21/2022 3:39:30 AM

It's hard to see the ETF conversion happening anytime soon as they've been trying for years and the timing couldn't be worse now from a PR perspective with the FTX/Alameda and Scam Bankman-Fried debacle.

Until early 2021 GBTC almost always traded at a premium to NAV and sometimes a rich one. This created a funding mechanism for enterprising crypto funds and investors in the last bull cycle. Buy inside new shares at NAV with a modest fee, hold for the 6 month lockup or whatever it was, and then sell them at the premium markup when the lockup expired. The opposite is happening now with GBTC trading near record discount to NAV.

Even worse, there are rumblings if they hold all the claimed BTC in the first place. They have recently demurred or given inadequate explanations of not providing wallet addresses or other tests against them to verify their ownership claims.

Most importantly, the GBTC structure is a subsidiary of parent DCG which is now known to have financial troubles. If the parent goes under GBTC and its siblings like ETHE get lobbed into the same bankruptcy which then means a court gets to adjudicate the final denouement. That's not a situation I'd take a flyer on right now. Tether, Binance, and DCG may be the last big shoes to drop in this crypto bear, in order of size. Time will tell.

[Glenn Petersen] If Grayscale’s Bitcoin ETF Dreams Fail, Firm May Try a Tender Offer, CEO Says M...

Glenn Petersen — 12/19/2022 6:58:10 AM

If Grayscale’s Bitcoin ETF Dreams Fail, Firm May Try a Tender Offer, CEO Says

Michael Sonnenshein attempts to assuage fears of Grayscale Bitcoin Trust investors after collapse of FTX

By Vicky Ge Huang
Wall Street Journal
Dec. 19, 2022 5:00 am ET

Grayscale Investments said the firm would explore new options to return a portion of the Grayscale Bitcoin Trust GBTC -4.46% capital to shareholders if it fails to transform the world’s largest bitcoin fund into an exchange-traded fund.

These options could include a tender offer for up to 20% of the outstanding shares of the $10.7 billion trust, Grayscale Chief Executive Michael Sonnenshein said in a letter to investors viewed by The Wall Street Journal. A tender offer would make a direct appeal to shareholders to sell—or tender—their shares at a specific price during a certain time.

The Grayscale Bitcoin Trust, known by its ticker symbol GBTC, trades like a closed-end fund, which can often trade at a premium or discount to the value of its holdings. Amid this year’s slump in digital assets, the discount rate has widened substantially. GBTC was trading at a 49% discount relative to the price of the bitcoins it held on Friday, according to YCharts. Currently, GBTC shares can be created but not redeemed, meaning that investors can only sell their holdings in the open market at a discount. The trust charges a 2% annual fee.

Grayscale has said that converting GBTC into an ETF would help bring its share price to trade in line with its underlying value. Market participants would be able to create and redeem shares of GBTC to ensure that they reflect the underlying value of the bitcoins it holds.

Mr. Sonnenshein’s letter attempts to assuage the fears of GBTC investors following the collapse of crypto exchange FTX last month, which has spread contagion across the industry. Grayscale’s parent company, Digital Currency Group, and affiliate firm, crypto lender Genesis Global Capital, are among those ensnared in the FTX meltdown. Genesis paused redemptions and loan originations after it couldn’t meet client withdrawal requests, and DCG said it owes Genesis around $1.7 billion through two loans.

The Securities and Exchange Commission has so far rejected Grayscale and others’ spot bitcoin ETF applications on the grounds that such products are vulnerable to fraud and market manipulation. The regulator has only allowed ETFs tracking bitcoin futures to come to market.

In June, Grayscale sued the SEC; the legal battle is ongoing.

Grayscale doesn’t have a specific timeline for when it would explore options beyond the ETF conversion, but it is prepared for all scenarios, Mr. Sonnenshein said in an interview with the Journal. Last year, Marlton LLC, an event-driven hedge fund focused on closed-end funds, said in an open letter to Grayscale that a tender offer could help narrow, if not eliminate, the GBTC discount.

Grayscale said the potential pursuit of a tender offer is dependent on relief from the SEC and shareholder approval. The company added that it may consider doing additional tender offers if the first such attempt is successful.

While DCG, Genesis and other affiliated entities collectively own nearly 10% of the total shares outstanding of GBTC, they are only permitted to sell up to 1% of the total shares outstanding into the public markets every three months under Rule 144 of the Securities Exchange Act of 1933, according to Mr. Sonnenshein.

DCG and Genesis aren’t counterparties or service providers for GBTC or any of Grayscale’s other products, he said in the letter.

If Grayscale is unable to return capital to GBTC shareholders via a tender offer or ETF, the company currently plans to continue operating GBTC without a continuing redemption program until it succeeds in converting it into a spot bitcoin ETF, Mr. Sonnenshein said in the letter.

“We are as committed as ever to converting GBTC to an ETF. It is what we are putting the full resources of the firm behind,” Mr. Sonnenshein said in the interview.

Write to Vicky Ge Huang at vicky.huang@wsj.com

If Grayscale’s Bitcoin ETF Dreams Fail, Firm May Try a Tender Offer, CEO Says - WSJ

[Madharry] Bitcoin is not a Ponzi scheme. Now you could say its a modern day version of the...

Madharry — 12/4/2022 11:10:31 PM

Bitcoin is not a Ponzi scheme. Now you could say its a modern day version of the tulip craze but there are only so many bitcoin that will be produced. and of course all those smart guys who own it under $1k now have a vested interest in supporting it and holding it for a few more decades rather than bailing on it and paying taxes. I plan to stick with what small speculation I have made and see where it takes me. it for sure is not gonna wipe me out. However, I am amazed at the level of trust people seemed to have that the companies would suddenly behave honorably in terms of segregating collateralized assets and releasing when loans are paid when the industry had historically been rife with thieves and scoundrels. Heck even major banks, which are regulated and supervised, have many times engaged in illegal activity to the detriment of their customers (Wells Fargo most recently).

[Elroy] Bitcoin is the largest most transparent Ponzi scheme ever created. So far it is...

Elroy — 11/29/2022 11:53:01 AM

Bitcoin is the largest most transparent Ponzi scheme ever created. So far it is working.

But I wouldn't be confident that it will continue to work for years and years. Maybe it will, but I sort of doubt it. If it grows in value, it causes inflation, and I can see outside forces coming together to destroy its value.

Ethereum does all the things written in your post, and more. So why have Bitcoin? Why not own Ethereum instead?

If the central government ever pulls of this "digital dollar" idea, then I think a lot of the current use case for Bitcoin (a bridge to all the other cryptos) goes away. If you can change your fiat into digital dollars, and then use those digital dollars to buy any other crypto, what's the need for Bitcoin?

Nevertheless, someone is buying it today for a bit more than $16,000, so they think it's worth that much. As long as those buyers exist more than sellers, the crypto Ponzi scheme will continue to work.

[Madharry] I may be completely wrong about this but I do think that bitcoin has some signif...

Madharry — 11/29/2022 11:42:56 AM

I may be completely wrong about this but I do think that bitcoin has some significant utility. I allows people to keep their assets away from government control and allows easy wealth transfers as long as you keep it from getting stolen from you. the only question is acceptability and that seems to have grown exponentially in the past few years. Since I never know what something is worth like bitcoin I think it makes sense to have a very small portfolio allocation and just average into it. My gut tells me that there will be a lot of crypto currencies that will fall by the wayside but that bitcoin will be a survivor. Some countries have egregious inheritance taxes
My uncle passed away in Belgium. He had no direct descendants and everything that was left to his nephews and nieces was taxed at 90%, including his residence.

[Elroy] However, there is going to be a turn at some point soon and with this fund sport...

Elroy — 11/22/2022 8:26:50 PM

However, there is going to be a turn at some point soon and with this fund sporting a 45% discount to underlying, and no relationship whatsoever to what's going on at FTX, its going to rocket. Who knows, this week may have even been the bottom.

I think the blow ups of the past six months in lots of crypto "projects" show that crypto isn't designed for centralized control, so most of these organizations (GBTC, Binance, all of them which "hold your crypto for you") are bad ideas.

Unwinding them all could take years. Perhaps years and years of blow ups are necessary before the centralization caused by these organizations is wiped out.

I don't see anything that says Bitcoin can't go to $100 in the next three years. And that sort of price decline can just feed more destruction of enterprises that have costs that are trying to build something expensive and useful and currently paying anyone or for anything with their Bitcoin holdings. The idea that it should stop going down and instead go up is based on ...... what?

[SGJ] Ive been out of GBTC for over a year now, but still follow it and looking for a ...

SGJ — 11/22/2022 11:59:47 AM

Ive been out of GBTC for over a year now, but still follow it and looking for a re entry. Not there yet, imo, especially since this latest episode of crypto meltdown due to FTX. However, there is going to be a turn at some point soon and with this fund sporting a 45% discount to underlying, and no relationship whatsoever to what's going on at FTX, its going to rocket. Who knows, this week may have even been the bottom.

grayscale.com

The Bitcoin in GBTC is more secure than holding it in your on line crypto account.