Selkis: News is Not Good for GBTC Shareholders or FUD Fighters
Selkis said that the news is not good for GBTC shareholders or for those fighting against FUD.
According to Ryan Selkis, CEO of blockchain research firm Messari, the controlling shareholders of Grayscale Bitcoin Trust (GBTC) cannot simply "dump" their holdings to raise more capital. Selkis explained that the restrictions are due to Rule 144A of the U.S. Securities Act of 1933, which forces issuers of over-the-counter, or OTC, traded entities to give advance notice of proposed sales, as well as a quarterly cap on sale of either 1% of outstanding shares or weekly traded volume.
2/ DCG bought nearly $800mm worth of GBTC shares since the premium flipped to a discount in early 2021.
— Ryan Selkis (@twobitidiot) November 28, 2022
DCG's board authorized up to $1.2bn of share purchases across Grayscale Trusts.
In light of the current liquidity issues, the remainder is likely on hold indefinitely.
It is much more likely that DCG-Genesis will refinance using GBTC as collateral, according to Selkis' calculations. This could result in up to $62 million in liquidations per quarter based on the outstanding shares test and $23 million in liquidations per quarter based on the trading volume test.
It is clear that there are some serious issues plaguing Grayscale Bitcoin Trust (GBTC) at the moment. The firm is currently trading at a massive discount to its net asset value (NAV) due to liquidity issues surrounding its operator, Genesis Global, and rumors of insolvency surrounding its owner, Digital Currency Group. It is said that Digital Currency Group bought nearly $800 million worth of GBTC shares since it began trading at a discount to NAV. The firm and its affiliates now own roughly 10% of the trust's outstanding shares. These problems have caused many to question the future of GBTC. However, it remains the largest Bitcoin investment trust in the world, and it is clear that Digital Currency Group is still very interested in it. Only time will tell if the firm can turn things around.
It is reassuring to see that Grayscale has clarified that its Bitcoin Trust is not in danger of being liquidated to pay back creditors, as some had feared. This should help to quell the rumors that have been circulating about the solvency of both Genesis Global and Digital Currency Group. It is important to remember that both of these companies are leaders in the digital currency space, and their continued success is crucial for the further adoption and development of cryptocurrencies.
As the cryptocurrency industry continues to mature, we are seeing more institutional investors get involved. One such investor is Grayscale, who recently published a letter revealing that it holds 635,235 Bitcoins in custody. This is a significant amount of money and shows that institutional investors are starting to take cryptocurrencies seriously. We believe that this trend will continue and more institutional investors will get involved in the space, helping to drive the prices of cryptocurrencies up.
