Tag: GBTC

ARK Invest Intensifies Investment in Robinhood

by Blockchain News

Cathie Wood, the renowned Bitcoin advocate and founder of ARK Invest, has recently intensified her firm’s investment in the cryptocurrency-friendly trading platform Robinhood (HOOD). ARK Invest made a significant move by acquiring 1.1 million Robinhood shares on November 8, amounting to an investment of over $9.5 million in a single day.

This acquisition involved three of ARK’s innovation-focused exchange-traded funds (ETFs): the ARK Innovation ETF (ARKK), the ARK Next Generation Internet ETF (ARKW), and the ARK Fintech Innovation ETF (ARKF). The ARKK fund led the charge, purchasing 888,500 shares of HOOD, which constituted 78% of the total shares bought that day.

Prior to this substantial purchase, ARK had been steadily buying Robinhood shares, albeit in smaller quantities compared to the latest transaction. For instance, the day before, ARK had acquired 259,628 shares for its ARKW fund, followed by another purchase of 197,285 shares on October 23.

This aggressive investment strategy coincided with Robinhood’s announcement of its plans to expand into Europe, specifically eyeing the launch of brokerage services in the United Kingdom in the coming weeks. This move by Robinhood was announced amidst a challenging period for the company, as its stock price (HOOD) dropped over 14% following an earnings report that fell short of expectations, primarily due to reduced trading volume and a shrinking customer base.

On November 8, the closing price of Robinhood’s stock was reported by TradingView as $8.37. In a parallel development, ARK has been divesting from the Grayscale Bitcoin Trust (GBTC). On the same day, ARKW sold 48,477 GBTC shares, totaling approximately $1.4 million.

Since October 24, ARK has offloaded a total of 427,573 GBTC shares, valued at around $11.9 million at the time of this report. This selling trend is nearing the total GBTC shares ARK sold in November 2022.

In addition to these market moves, ARK has announced plans to launch new ETFs focusing on Bitcoin and Ether futures contracts. This initiative will be in collaboration with 21Shares, ARK’s primary partner in cryptocurrency ETFs.

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Bitcoin Surges Past $28,000 and GBTC Discount Narrows to 17%

by Blockchain News

Following Grayscale Investments’ decisive win in its lawsuit against the U.S. Securities and Exchange Commission (SEC), Bitcoin’s value reached an apex of $28,142 on Binance. Concurrently, the discount rate for Grayscale’s Bitcoin Trust (GBTC) experienced a notable contraction, shrinking from a previous 25% to a current 17%.

The court ruling has instilled renewed confidence in the cryptocurrency market, leading to bullish sentiment and immediate market reactions. On August 29, 2023, the D.C. Circuit Court of Appeals ruled in favor of Grayscale Investments, allowing the firm to convert its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF). This groundbreaking decision has set a precedent for digital asset managers and has opened new avenues for regulated cryptocurrency investments.

The market’s swift response to the legal victory was evident not just in Bitcoin’s new peak but also in the increased demand for GBTC shares, as reflected in the rapidly compressing discount rate.

Digital Currency Group (DCG), the parent company of Grayscale, expressed their satisfaction with the court’s decision. In a tweet, DCG stated, “Today’s ruling by the D.C. Circuit in favor of @Grayscale and $GBTC is a historic victory for crypto advocates. We are pleased with the immense progress that this decision represents.”

The rise in Bitcoin’s price and the decrease in the GBTC discount rate are both direct results of Grayscale’s success in their legal battle against the SEC. The regulatory environment is always shifting, and market players will be paying careful attention to how recent developments and upcoming changes will affect the bitcoin ecosystem as a whole as this process continues.

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Grayscale Submits Comment Letter to SEC Regarding Spot Bitcoin ETF Application

by Blockchain News

As Grayscale Investments awaits a decision from the DC Circuit in their lawsuit to convert GBTC to a spot bitcoin ETF, the legal team at Davis Polk has submitted a comment letter to GBTC’s pending 19b-4 filing. This also includes seven other spot bitcoin ETF filings with newly-proposed surveillance sharing agreements (SSAs).

The comment letter, submitted recently, encapsulates Grayscale’s rationale for why the SEC should approve all spot bitcoin ETF applications. The firm remains encouraged by the increased momentum around these filings, underscoring the continued maturation of the bitcoin spot market and reinforcing the belief that American investors should have access to spot bitcoin ETFs in the US.

Grayscale argues that the SEC is already in a position to approve spot bitcoin ETFs, given its previous approval of bitcoin futures ETFs. With third-party studies showing a 99% correlation between Bitcoin’s spot and futures markets, surveillance of the CME bitcoin futures market should suffice to protect against potential fraud or manipulation in the underlying spot bitcoin market.

While Grayscale does not view the introduction of an SSA with a spot bitcoin market as the sole solution for getting spot bitcoin ETFs approved in the US, the organization continues to support efforts that enable investors to access the crypto ecosystem. Grayscale applauds progress that brings more oversight to centralized crypto markets and commits to taking necessary action to convert GBTC to an ETF.

Grayscale emphasizes that the SEC’s actions related to bitcoin ETFs should be made in a fair and orderly manner. As a disclosure-based regulator, the SEC should provide issuers with feedback or guidance consistently and equitably, without picking winners and losers.

Grayscale believes that for the benefit of Bitcoin, the market, and investors, all spot bitcoin ETF applications should be approved simultaneously. This approach ensures American investors are protected and have access to their choice of bitcoin investment vehicles.

With nearly one million investors across all 50 states owning GBTC, Grayscale stresses that GBTC’s conversion to an ETF would return billions of dollars in value to these investors. The firm will continue to advocate for the approval of spot bitcoin ETF applications, emphasizing that there is no reason to keep GBTC investors from the spot bitcoin ETF they deserve.

Grayscale uses the term “ETF” to refer to exchange-traded investment vehicles, including those required to register under the Investment Company Act of 1940, as well as other exchange-traded products not subject to the registration requirements of the ’40 Act.

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GBTC Litigation: Fir Tree and Grayscale Reach Agreement

by Blockchain News

Fir Tree Partners, a significant shareholder of the Grayscale Bitcoin Trust (GBTC), and Grayscale Investments have reached an agreement resolving a lawsuit filed by Fir Tree in December 2022. The litigation sought documents and information from Grayscale about potential mismanagement and conflicts of interest at GBTC.

The lawsuit highlighted Fir Tree’s concerns about Grayscale’s refusal to allow redemptions despite no relevant regulatory restrictions, GBTC’s extensive conflicts of interest and lack of independent oversight, and its campaign to convert GBTC into an ETF.

Under the terms of the agreement, Grayscale has agreed to voluntarily produce certain books and records in response to Fir Tree’s demand. In return, Fir Tree has agreed to dismiss its books-and-records litigation against Grayscale.

Despite this agreement, Fir Tree expressed disappointment that Grayscale management refused to comply with Fir Tree’s information rights for months and has still failed to address concerns about GBTC’s structure and the unavailability of redemptions.

Fir Tree has proposed a simple solution for GBTC, suggesting that Grayscale permit redemptions of outstanding GBTC shares so that shareholders may recover some portion of their investment. This proposal has been repeatedly rejected by Grayscale over the last eight months.

In March 2023, Fir Tree proposed an alternative solution: that Grayscale conduct a tender offer for a meaningful percentage of outstanding GBTC shares. This proposal was also rejected by Grayscale and DCG.

Fir Tree believes that a tender offer could unlock significant value for GBTC shareholders, DCG, and Genesis creditors. For example, if Grayscale were to conduct a tender offer for 20% of shares outstanding at 94% of NAV, it could potentially unlock $3.6 billion in immediate value for GBTC shareholders who participate in the tender offer.

Fir Tree urges Grayscale to act in the best interests of all GBTC shareholders and finally commit to a long-overdue tender offer to unlock billions in immediate value for all shareholders who participate in a tender.

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Bitcoin’s Dawn of the ETF Era: ARK Investment

by Blockchain News

According to a report by ARK Investment, in June 2023, Bitcoin experienced a resurgence in institutional sentiment, with the supply of Bitcoin that had remained unmoved for at least a year reaching an all-time high of approximately 70% of the circulating supply. This development suggests a strong holding pattern among Bitcoin investors, a trend that is likely to impact the cryptocurrency’s future trajectory.

The month also saw a narrowing of the Grayscale Bitcoin Trust’s (GBTC) discount to Bitcoin’s net asset value (NAV), possibly due to Blackrock’s Bitcoin ETF application or indications that Grayscale had gained an edge during its trial against the SEC. This shift towards a one-year low in the GBTC’s discount to Bitcoin’s NAV could signal a growing institutional interest in the cryptocurrency.

Institutional activity in Bitcoin, as indicated by the balance of Bitcoin on OTC desks, hit a one-year high in June. This uptick in institutional activity coincides with BlackRock’s filing for a Bitcoin ETF, following ARK/21 Shares’ filing in April. The move by BlackRock, a global investment management corporation, suggests a growing acceptance of Bitcoin in traditional finance circles.

However, the global economy appears to be heading towards a recession, with recent data from the manufacturing sector indicating a decline in new orders in the Purchasing Managers’ Index, a proxy for future manufacturing activity. In 2022, the US Gross Domestic Product (GDP) declined for two consecutive quarters, implying a technical recession.

In other news, the SEC filed charges against Coinbase for operating as an unregistered securities exchange, broker, and clearing agency, and against Binance entities and founder Changpeng Zhao. Robinhood announced plans to delist tokens for Solana, Cardano, and Polygon after SEC suits named them as securities. Meanwhile, the Tether USDT stablecoin’s market cap climbed to an all-time high of $83.2B.

Despite these challenges, Bitcoin’s holder base and network activity remained strong in June, with active owners increasing by 9.1% and long-term holder supply increasing by 0.11%. These trends suggest a robust and resilient Bitcoin ecosystem, even in the face of potential economic downturns and regulatory hurdles.

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Gemini Co-founder Marks Spot Bitcoin ETF Approval Struggle for A Decade

by Blockchain News

The 10-year anniversary of the day that Cameron Winklevoss and his brother Tyler filed for the top slot in the first Bitcoin Exchange-Traded Fund (ETF) was celebrated today by the co-founder of the cryptocurrency exchange Gemini. The businessman took the opportunity to lambast the Securities and Exchange Commission (SEC) of the United States for its ongoing refusal to approve such items. He claimed that this hesitation has proven to be harmful to American investors.

The Winklevoss brothers think that the SEC’s efforts have harmed investors more than they have helped them, especially by preventing them from investing in Bitcoin, the asset that has performed the best over the previous ten years.

The SEC’s opposition to approving Bitcoin ETFs, according to Cameron Winklevoss, has instead led investors to “toxic products” like the Grayscale Bitcoin Trust (GBTC). He emphasised the problems with GBTC, such as the enormous discount to Net Asset Value (NAV) and the extremely high fees.

Furthermore, he emphasised how this regulatory impasse has prompted spot Bitcoin activity to move overseas. Winklevoss claims that as a result, dangers for investors have increased because they are now dealing with unregistered and unregulated venues.

One significant result highlighted by Winklevoss was the fact that investors are now turning to platforms like FTX as a result of the SEC’s denial. He argues that because of this, they have been the victims of one of the biggest financial frauds in contemporary history.

Winklevoss urged the SEC to consider its record in a call to action. He advised the SEC to concentrate on carrying out its mandate rather than exceeding its statutory authority and serving as an economic life gatekeeper. This includes promoting fair and orderly markets, protecting investors, and assisting with capital development.

His concluding remarks showed his support for those who are still fighting for U.S. spot Bitcoin ETFs. It is evident that the Winklevoss brothers are still dedicated to their goal despite their ten-year battle, indicating a continuing difficulty for regulators. 

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Grayscale CEO challenges SEC’s denial of application

by Blockchain News

Michael Sonnenshein, CEO of Grayscale Investments, stated in a recent interview that he “can’t imagine” why the United States Securities and Exchange Commission (SEC) “wouldn’t want” to protect Grayscale investors and return the true asset value to them. Sonnenshein made this statement in response to a question regarding why the SEC “wouldn’t want” to protect Grayscale investors.

Sonnenshein explained that the SEC “violated the administrative procedures act” by denying approval for the Grayscale Bitcoin Trust (GBTC) to be a spot Bitcoin (BTC) exchange-traded fund (ETF), in June 2022, during an interview that took place on February 25 on What Bitcoin Did, a popular podcast that is hosted by Peter McCormack. The podcast is called What Bitcoin Did.

He stated that this act ensures that the regulator does not show “favoritism” or act “arbitrarily,” adding that the SEC acted “arbitrarily” by approving Bitcoin Futures ETFs while rejecting “GBTC’s conversion.” He explained that this act ensures that the regulator does not show “favoritism” or act “arbitrarily.”

Grayscale Investments saw the SEC’s approval of the first Bitcoin exchange-traded funds (ETFs) as “a indication” that the SEC was “changing its approach about Bitcoin,” according to Sonnenshein’s observation.

He stated that there is a “couple billion dollars” of capital that would immediately go back into investors’ pockets, on a “overnight basis,” if GBTC was approved as a spot Bitcoin ETF, and that this capital would “bleed back” up to the fund’s net asset value. He said this would occur if the fund was approved as a spot Bitcoin ETF (NAV).

Sonnenshein noted that this is because GBTC is now trading at a discount to its NAV. However, if it were to convert to an ETF, there would “no longer” be a discount or a premium; instead, there would be a “arbitraged mechanism” incorporated in the product.

He reaffirmed that Grayscale is now “suing the SEC now,” and that the company may have a ruling appealing the SEC’s rejection of its original application as early as “fall 2023.”

In addition to this, he said that Grayscale has more than “a million investor accounts,” and that investors from all around the globe trust on the company to “do the right thing for them.”

Sonnenshein “can’t fathom” a scenario in which the SEC would have no interest in “protecting investors” or “returning that value” to those investors.

He continued by saying that Grayscale isn’t going “to shy” away from the fact that it has a “commercial interest” in this approval, noting that if the application to challenge the SEC is denied, Grayscale may be able to appeal the case to the United States Supreme Court. He said that Grayscale isn’t going “to shy” away from the fact that it has a “commercial interest” in this approval.

This comes as a result of the Securities and Exchange Commission (SEC) filing a 73-page brief with the United States Court of Appeals for the District of Columbia in December 2022, outlining its reasons for denying Grayscale’s request to convert its $12 billion Bitcoin Trust into a spot-based Bitcoin ETF in June 2022. The brief was submitted in response to Grayscale’s request to convert its Bitcoin Trust into a spot-based Bitcoin ETF.

The conclusions that Grayscale’s approach did not adequately safeguard against fraud and manipulation were the primary considerations that led to the SEC’s determination.

The regulator has arrived at a same conclusion in a number of past applications for the creation of spot-based Bitcoin ETFs.

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Grayscale withholds on-chain reserve evidence for security reasons

by Blockchain News

Grayscale Investments, a company that sells cryptocurrency investment products, has declined to provide on-chain proof of reserves or wallet addresses in order to demonstrate the digital currency products’ underlying assets, citing “security concerns.” Grayscale Investments is a cryptocurrency investment product provider. Grayscale laid out information regarding the security and storage of its cryptocurrency holdings in a Twitter thread on November 18 that was dedicated to addressing investor concerns. The company stated that all of the cryptocurrencies that underpin its investment products are stored with Coinbase’s custody service, but it refrained from disclosing the wallet addresses.

Grayscale continued by saying, “We are aware that the previous point, in particular, will be a letdown to some,” but “fear created by others is not a good enough justification to violate intricate security mechanisms that have kept our clients’ funds secure for years.”

In the aftermath of FTX’s ongoing liquidity troubles and ultimately bankruptcy, Grayscale has decided to take this step in response to the mounting pressure being placed on the crypto industry to implement proof of reserves.

Some people on Twitter disagreed with Grayscale’s view that security concerns were behind its decision to withhold its wallet addresses. One user commented that although the addresses of Satoshi Nakamoto, the inventor of Bitcoin, are widely known and are of greater value to attackers, “Satoshi’s Bitcoin remains secure.”

Grayscale distributed a letter that was co-signed by Alesia Haas, the CFO of Coinbase, and Aaron Schnarch, the CEO of Coinbase Custody. The letter detailed Grayscale’s holdings according to its investment products and reaffirmed that the assets “are secure.” Additionally, the letter stated that each product has its “own on-chain addresses,” and that the crypto always belongs “to the applicable Grayscale product.”

Grayscale further said that every one of their products is structured as its own independent legal company, and that “rules, regulations, and contracts […] forbid the digital assets underpinning the goods from being leased, borrowed, or otherwise encumbered.”

Although Grayscale is best known for its Grayscale Bitcoin Trust (GBTC), a security that follows the price of Bitcoin, the company also offers products that follow the price of other cryptocurrencies, like Ether and Solana. Genesis Global, which serves as the liquidity provider for GBTC, announced on November 16 that it had halted withdrawals, citing “unprecedented market turmoil” as the reason. This “unprecedented market turmoil” had led to significant withdrawals from its platform, which exceeded its current liquidity. This has caused investor concerns.

Grayscale is also owned by the cryptocurrency-focused venture capital firm known as Digital Currency Group (DCG), which is also the parent company of Genesis.

Investors are speculating on GBTC’s exposure to Genesis, which may be one reason why the company’s stock is selling at a discount of over 43 percent compared to its net asset value.

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Grayscale Launches New Crypto Dealer as Genesis Got Incapacitated With 3AC Bankruptcy

by Blockchain News

Grayscale Investments, one of the largest asset managers in the digital currency ecosystem has launched a new broker-dealer dubbed Grayscale Securities, recent filings with the United States Securities and Exchange Commission show.

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The firm has to launch this new outfit considering the fact that its sister firm, Genesis is battling a liquidity crisis following its huge exposure to the now bankrupt Three Arrows Capital (3AC). Genesis filed a $1.3 billion claim against 3AC, making some of the firm’s broker-dealer operations somewhat difficult to handle at this time.

 

As a dynamic investment manager, Grayscale requires a steady offshoot to handle its crypto trust products and fronting an in-house dealer will afford it the stability it so craves. Grayscale Securities has registered with the SEC as well as with FINRA and it will henceforth be able to source the required crypto holdings for the parent company’s trusts.

 

The transition from the dependence on Genesis as its broker-dealer to the integration of Grayscale Securities kickstarted on Monday, October 3rd. The transition is even more advised as Genesis has been seeing an exodus of its key officials with its current woes brought on by its exposure to 3AC.

 

Grayscale itself has been in the news lately especially with its recent legal spat with the United SEC over the failed conversion of its Grayscale Bitcoin Trust (GBTC) to a full-fledged Bitcoin Exchange Traded Fund (ETF) product. 

 

In its characteristic manner, the SEC rejected the application for the conversion of the product after many delays. With the belief that the SEC’s decision is not in the best interest of its clients and the broader investing community, Grayscale went ahead to onboard Donald Verrilli, a top solicitor during the Obama Administration to lead its lawsuit against the commission.

 

The case is still in its early stages and it comes off as one that may be stretched out like the ongoing SEC vs Ripple lawsuit.

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BlockFi Stops Accepting GBTC as Collateral

by Blockchain News

BlockFi, a major crypto lending firm based in New Jersey, has reversed its earlier decision, and now stop accepting shares in the Grayscale Bitcoin Trust (GBTC) as collateral for loans.

Early Tuesday, the non-bank lender announced that it would cease accepting GBTC as loan collateral.

In a statement, a BlockFi representative said: “While we don’t currently hold any positions in GBTC and are winding down a couple of loans where GBTC is part of the collateral package, we are not saying that we won’t support GBTC as collateral moving forward. Like any collateral, we constantly evaluate appropriate collateral haircut ratios and aim to accept as many types of collateral that our clients hold as possible.”

The earlier move by BlockFi to seek winding down its positions in Grayscale’s Bitcoin Trust was because of its exposure to Singapore-based hedge fund firm Three Arrows Capital (3AC). BlockFi lost about $80 million from Three Arrows’ bad debt in terms of the GBTC investment product whose value dropped massively amid the recent collapse of the struggling hedge fund.

GBTC allows investors to gain exposure to Bitcoin without directly purchasing and holding the cryptocurrency themselves.

Crypto Contagion Risk

The move by these firms, including BlockFi, came as a response to the controversy facing Three Arrows Capital, which had a huge stake in GBTC and was offering arbitrage opportunities around the Grayscale fund.

BlockFi has been hit hard by the contagion risk triggered by the collapse of the Three Arrows Capital. Many other crypto firms, including lending platforms Celsius Network, Voyager Digital, and Vauld, also saw their fortunes wiped off amid the crash of TerraUSD and LUNA and consequently the downfall of the prominent leveraged crypto hedge fund Three Arrows Capital.

Grayscale’s GBTC is a widely traded Bitcoin fund. Recently, Grayscale filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) for rejecting its application to convert its GBTC into a spot Bitcoin ETF (Exchange-Traded Fund). Among the reasons why the SEC rejected Grayscale’s application was the possibility of manipulation of Bitcoin trades — an argument apparently boosted by Three Arrows’ botched arbitrage trading plan.

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