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Grayscale Delays Decision On EthereumPoW Tokens: Navigating Uncertainty

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Grayscale Investments, a top crypto investment firm, will take more time to consider purchasing and selling Ethereum tokens post-Merge fork. They plan to assess the market environment to determine if they can acquire EthereumPoW tokens. 

A Hold On EthereumPoW Token Transactions

As per the press release, Grayscale Ethereum Trust, the largest digital currency asset manager globally, has declared a distribution for the ETH Proof of Work tokens received from the Ethereum blockchain fork in September 2022.

Grayscale Investments was appointed as an agent on behalf of the record-date shareholders, planning to acquire and sell the ETHPoW tokens within 180 days from the Record Date.

However, due to the trading venues for ETHPoW tokens not being broadly established and continued uncertainty regarding digital asset custodians’ support, Grayscale has decided to extend the review period. 

The company needs more time to evaluate whether it can acquire the tokens and if trading markets with meaningful liquidity will develop.

The market’s uncertainty and the potential for significant volatility in ETHPoW token prices make it impossible to predict whether Grayscale, as an agent, will be able to acquire the tokens or the value that it will be able to realize from the sales. 

There is no guarantee regarding the prices of ETHPoW tokens that may be obtained if Grayscale decides to sell them, and the tokens’ value may either rise or fall following their sale by Grayscale acting as an intermediary.

Grayscale Investments emphasized that it acts only as an agent of the Record Date Shareholders, not as a sponsor or manager of the Products. The company needs to take a cautious approach, given the unpredictability of the market and the potential risks associated with investing in cryptocurrency.

Nevertheless, Grayscale Investments’ decision to extend the review period for acquiring and selling post-Merge forked Ethereum tokens shows the company’s commitment to careful evaluation and cautious investment strategies in the volatile cryptocurrency market. 

While there is potential for significant gains, the market’s uncertainty and volatility make it necessary to proceed cautiously.

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Grayscale’s Bitcoin ETF Lawsuit Gains Major Advantage Over SEC

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In a major development to the Grayscale’s Bitcoin ETF lawsuit, a panel of judges in Washington quizzed the SEC over its decision to reject the latter’s application for its flagship spot investment fund, while approving other products.

The US top regulator rejected Grayscale Investment LLC’s application last June on the grounds of not meeting anti-fraud and investor protection standards.

Judges at the court hearing stated that since both Grayscale’s spot and futures funds depend on the price of bitcoin, the regulator’s earlier approval of specific surveillance agreements to prevent fraud in bitcoin futures-based ETFs should also be acceptable for Grayscale’s spot fund.

One of the judges, Neomi Rao stated,

It seems like it’s fine for an agency to say okay, we need some more information, but it seems there’s quite a bit of information here on how these markets work together, and the SEC has not offered any explanation… that the petitioners here are wrong.

Emily True Parise, senior litigation counsel for the SEC, claimed that there is not enough information available for the agency to establish if the agreements for surveillance may also detect potential fraud and manipulation in the spot markets.

“The evidence is just mixed at this point. It’s bi-directional sometimes,” she said.

On the other hand, Grayscale’s lead counsel Donald Verrilli Jr. argued that a spot bitcoin ETF would “better protect investors” because it would give them the advantage of oversight based on the surveillance arrangements established with the Chicago Mercantile Exchange, where BTC futures are traded.

In Jan, this year, Grayscale’s Chief Legal Officer, Craig Salm accused the SEC of treating spot bitcoin ETFs differently from the futures ETFs, despite both deriving their pricing from the same underlying spot BTC markets. 

Salm went on to say that the “substantial market test” that the SEC used to assess the proposal was deeply flawed, excessive, arbitrary, and unreasonable. 

Proponents Vouch For Spot Bitcoin

It needs to be mentioned that in 2019, Grayscale Investment Fund, filed Form 10 with the SEC to push its ETF product only to be thwarted several times by the agency citing multiple reasons.

Michael Sonnenshein, the CEO of Grayscale, recently stated that he anticipates the court would decide in Grayscale’s favor and that he expected a definitive decision in the case this fall.

Bitcoin futures ETFs follow contracts to buy or sell bitcoin at a specific price on a specific date whereas a spot bitcoin ETF tracks BTC’s underlying market price.

A spot bitcoin ETF, according to supporters, would give investors exposure to BTC without requiring them to buy it.

$9B At Stake: FTX Debtors Sue Grayscale For Violating Trust Agreements

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FTX and its associated debtors have made an announcement regarding a lawsuit filed by one of their debtor affiliates, Alameda Research, against Grayscale. Additionally, the FTX debtors have raised claims against Grayscale’s CEO, Michael Sonnenshein, as well as its proprietors, Digital Currency Group and Barry Silbert.

The move has the potential to release over $9 billion in value for shareholders of Grayscale Bitcoin and Ethereum Trusts. The lawsuit claims that Grayscale has violated the Trust agreements by charging exorbitant management fees, preventing shareholders from redeeming their shares, and causing the Trusts’ shares to trade at a 50% discount to Net Asset Value.

FTX Debtors Seek Recovery, Potential For 90% Increase In Value

The FTX Debtors are pursuing an injunction to recover assets worth over $250 million for their clients and debtors. If Grayscale lowers its fees and ceases to impede redemptions, the value of FTX Debtors’ shares could increase by around 90% to at least $550 million.

John J. Ray III, the CEO of FTX Debtors, affirmed that they would utilize all available resources to optimize recoveries for both FTX customers and creditors. He further stated that their objective is to unlock the potential value that they believe is being suppressed by Grayscale’s self-serving actions and unjust redemption prohibition. 

Through their efforts, not only will FTX customers and creditors benefit from increased recoveries, but other investors in Grayscale Trust who are being negatively impacted by Grayscale’s actions will also benefit.

The lawsuit filed against Grayscale comes as no surprise to many who have been following the ongoing saga between the two companies. 

Grayscale has been the subject of criticism from some investors who claim that the company’s management fees are too high and that it has prevented shareholders from redeeming their shares. Grayscale has argued that it has taken steps to address these concerns and that it has acted in the best interests of its shareholders.

The outcome of the lawsuit filed by the FTX Debtors remains uncertain, but it could have significant implications for both companies and their shareholders. If the FTX Debtors are successful in unlocking $9 billion in value, it could provide a significant boost to their customers and creditors.

Grayscale, on the other hand, could face further legal challenges and may be forced to make changes to its management fees and redemption policies. 

The lawsuit highlights the ongoing debate over the role of fees and transparency in the cryptocurrency industry and underscores the importance of companies acting in the best interests of their shareholders.

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Grayscale Holds 3.28% Of The Bitcoin Market With $10.5B In BTC

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Today, Wu Blockchain revealed that Grayscale, a Leader in Digital Currency Investing, currently owns 632,000 Bitcoin (BTC) with a value of around $10.5 billion – accounting for 3.28% of the Bitcoin market’s worth. 

It is accompanied by an attractive premium rate of minus 45.17%. The company also has over 3 million ETH, with a total cost of $3.6 billion and taking up 2.54% of the Ethereum market’s overall worth.

Grayscale ETH’s premium rate is now minus 59.3%. With the current premium rate being negative 76.69%, the value of having more than 11.84 million Ethereum Classic is around $190 million, or about 8.50% of the currency’s market value.

Moreover, concerns among crypto investors have been raised by the status of the Grayscale Bitcoin Trust (GBTC), the biggest BTC trust in the world. 

However, there have been discussions about the fund’s future and whether it is facing problems due to the significant premium relative to its net asset value (NAV).

Grayscale Troubled Bitcoin Trust (GBTC)

The co-founder and CIO of Valkyrie Investments, Steven McClurg, recently announced the company’s intention to assume management of the Grayscale Bitcoin Trust.

The statement addressed the specific difficulties currently facing the GBTC and positioned the Valkyrie team as the most qualified to manage the fund.”

According to a report by Bloomberg on Monday, Nashville-based asset manager Valkyrie Investments announced the launch of the Valkyrie Opportunistic Fund to take advantage of the large discount on Grayscale Investments’ $10.5 billion GBTC product.

The Valkyrie fund intends to increase its ownership of GBTC to realize the total value of the underlying Bitcoin for its investors, which the company stated is a goal it will actively pursue on behalf of its investors.

Valkyrie Investments, Co-founder and CIO, Steven McClurg stated that:

We understand that Grayscale has played an important role in the development and growth of the bitcoin ecosystem with the launch of GBTC, and we respect the team and the work that they have done.

He added that a change is necessary due to recent events involving Grayscale and its related companies. Valkyrie believes it is the best company to manage GBTC and ensure that its investors are treated fairly.

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Here’s Why Grayscale is Being Sued For Allegedly Mismanaging Its GBTC

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Grayscale Investments is the target of a lawsuit brought by hedge fund Fir Tree. To look into “possible mismanagement and conflicts of interest” at its $10.7 billion Bitcoin fund, it is requesting information. The information sought might be used to compel the firm to alter how its flagship Bitcoin Trust—GBTC—is managed.

According to a recent Bloomberg report,

“Fir Tree, which manages $3 billion, wants to use the information to push Grayscale to erase the discount by lowering fees and resuming redemptions, said people familiar with the hedge fund’s plans. The trust has roughly 850,000 retail investors who have been “harmed by Grayscale’s shareholder-unfriendly actions,” the firm said in the complaint.”

Grayscale’s Redemption Bar “Self-Imposed”

Grayscale’s redemption bar, which dates to 2014, was allegedly “self-imposed,” according to Fir Tree. It further stated that the trust could permit investors to withdraw their money without obstruction under the law. However, the firm has stated in regulatory filings that it is unable to provide an “ongoing redemption program.”

The hedge fund further claimed that Grayscale resisted share redemption since doing so would reduce profits. The corporation allegedly sold “an incredible number” of additional shares between 2018 and 2021, according to the lawsuit. It imposed a 2% fee, higher than its rivals, on the market value of its Bitcoin holdings rather than the lower share market price. The firm received $615.4 million in fees last year, according to Fir Tree.

Grayscale’s attempts to turn the trust into an ETF must also be stopped, according to Fir Tree. The firm has often asserted that this is the only method company can legitimately redeem shares. According to a statement sent to Bloomberg by a Grayscale spokesperson through email,

“In 2013, we launched Grayscale Bitcoin Trust (GBTC) to provide investors with access to Bitcoin, and always with the intention of converting it to an ETF when permitted by US regulators. We remain 100% committed to converting GBTC to an ETF, as we strongly believe this is the best long-term product structure for GBTC and its shareholders.”

Since late February, GBTC shares have been trading at a discount. The discount gap was as wide as 43.04% at the time of publication.

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Source: Y Charts

Grayscale sues SEC; how the tables have turned

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Grayscale submitted documents to the Securities and Exchange Commission (SEC) in October of last year in order to turn its Bitcoin Trust into an ETF. Following several extensions, the regulatory agency on Wednesday issued a rejection decision. Likewise, Grayscale’s application did not address the regulator’s concerns regarding how it would guard against market manipulation and safeguard the interests of investors and the general public.

As a result, the SEC has not yet given the go-ahead for a spot Bitcoin ETF. However, it has already approved a few products based on futures. In November of last year, the crypto asset management firm wrote to the SEC with the same justification. They had argued that it was “arbitrary and capricious” for the SEC to approve futures products but not spot ones. Additionally, the firm underlined that the bias in question might constitute a breach of the Administrative Procedure Act.

Donald B. Verrilli, Jr., senior legal strategist at the firm, reiterated the same by saying,

“As Grayscale and the team at Davis Polk & Wardwell have outlined, the SEC is failing to apply consistent treatment to similar investment vehicles and is therefore acting arbitrarily and capriciously in violation of the Administrative Procedure Act and Securities Exchange Act of 1934.”

Recall that Grayscale strengthened its legal staff by hiring Donald Verrilli, a top attorney from the Obama administration, at the beginning of June. The company was already considering the risk that the decision might not be in its favour at the time. Notably, Verrilli served as US solicitor general under the Obama administration from 2011 to 2016. He had acted as the government’s attorney in numerous Supreme Court matters.

Grayscale treads on legal waters

Grayscale made the decision to quickly traverse legal waters when the rejection order was issued. The CEO of Grayscale, Michael Sonnenshein, announced on Twitter that a lawsuit had been filed to contest the SEC’s judgement.

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In his final statement, Sonnenshein said that Grayscale will keep using its “full resources” to fight for its shareholders’ rights and the “equitable regulatory treatment” of Bitcoin investment vehicles.

Inverse Bitcoin ETF beneficial for crypto: Grayscale CEO

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Grayscale CEO Michael Sonnenshein recently asserted on Twitter that the introduction of the first short Bitcoin exchange-traded fund (ETF) in the United States could be encouraging for the cryptocurrency sector.

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He thinks that the U.S. Securities and Exchange Commission’s approval of new BTC-related goods shows that the powerful regulator is gradually growing more at ease with the biggest cryptocurrency.

According to U.Today, on Tuesday, trading on the New York Stock Exchange (NYSE) began for the ProShares Short Bitcoin Strategy (BITI), which provides exposure to the inverse performance of the biggest cryptocurrency.

The SEC’s approval of ProShares’ Bitcoin futures ETF in October was seen as a turning point for the cryptocurrency market and rekindled the second stage of the 2021 bull run.

But the authority has so far turned down every application to allow a spot-based Bitcoin ETF. Currently, Grayscale is putting up a valiant campaign to persuade the SEC to turn its flagship trust into an exchange-traded fund. Sonnenshein has nevertheless emphasized that he is not identifying the recent correction’s bottom.

BTC’s price dropped to $17,500 on Saturday, but it was able to launch a small comeback after that. The top cryptocurrency experienced a rise on Tuesday, reaching a high of $21,708.

Bitcoin to Test $17,000 Again?

Former NYSE Group President Tom Farley recently claimed that the price of Bitcoin may end up retesting the $17,000 level during an appearance on CNBC.

Yet he considers the current price decline to be a “very wonderful” purchasing opportunity, suggesting that the cryptocurrency has at least temporarily struck a bottom. Farley is of the opinion that the market has already capitulated.

After a protracted run of losses, the largest cryptocurrency in the world was able to retake the $21,000 mark earlier today, marking a tiny success for bulls.

Arthur Hayes, the former CEO of BitMEX, forewarned on Monday that there would be additional forced selling as a result of market uncertainty. In the past, Paul Krugman, a Nobel Prize-winning economist, warned that the tiny comeback would just be a dead-cat bounce.

Chris Burniske, a cryptocurrency analyst, recently tweeted that he would not be surprised if BTC fell under the $10,000 mark. There is more possibility for a downturn because miners have not yet given in. Burniske also thinks that the unfavorable macro environment will make it difficult for Bitcoin to recover.

Grayscale doubles down on its efforts for a Spot Bitcoin ETF

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Asset management firm Grayscale has renewed efforts to gain permission from the US securities watchdog in converting the world’s largest crypto investment vehicle into an exchange-traded fund.

As per a letter sent to the regulator, the asset manager is bolstering its application with the Securities and Exchange Commission to convert its $40 billion Bitcoin Trust into a spot Bitcoin ETF.

The latest move from Grayscale comes as the SEC is contemplating whether to give the green signal for US exchange-traded funds to hold bitcoin, rather than derivatives linked to the cryptocurrency, for the first time.

The investment firm is currently awaiting to hear back from the SEC in early July on a decision that would change its Bitcoin Trust into an ETF. If they are rejected, Grayscale Investments CEO Michael Sonnenshein has hinted that it is willing to flip the script and take SEC to court.

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While there is no doubt that Grayscale’s CEO has been one of the vocal SEC critics, he is not alone. In an interview, this month, Bitwise Asset Management’s Matt Hougan took note of the fallacy and said,

“The SEC is objecting on the grounds of manipulation concerns, but its specific request was to demonstrate that regulated CME markets are of significant size. Bitcoin is now an institutional market. It’s a market with institutional service providers, institutional investors, and a large and robust regulated futures market.”

Grayscale’s gambit is monumental for the crypto industry

Several other crypto firms have already been reprimanded in their attempts to open similar funds and Grayscale’s gambit represents one of the crypto industry’s last hopes of launching such a product in the near future.

But that has hardly acted as a deterrence. As ETF Trends CEO Tom Lydon pointed out that a growing number of financial advisors are interested in investing in a bitcoin ETF.

A 2022 Bitwise/ETF Trends Survey revealed that 82% of advisors prefer a spot bitcoin ETF over a futures-based alternative. The demand has also increased for bitcoin products that investors can purchase on traditional brokerage platforms, Lydon said.

Right now, there are not many choices, so it’s not going backward, he added. Crypto experts are still hopeful a spot bitcoin ETF could make its entry as early as this year.

Dogecoin fails to impress grayscale’s Barry Silbert; DOGE creator hits back

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What an impressive run it has been for the Shiba-Inu featured meme token- Dogecoin [DOGE]. A lot of its exposure has to do with the “Musk effect“. The Tesla Chief’s guest-hosting appearance on this week’s Saturday Night Live had further caused a stir in the cryptocurrency market.

The recent exchange listings on eToro as well as Gemini have backed the dog-themed cryptocurrency to sustain its rally and helped it to surpass XRP as the fourth-largest cryptocurrency by market cap. But unlike previous instances, when Elon Musk managed to sway the general investor crowd into FOMOing DOGE, this time it has been the opposite.

The memecoin took a plunge by more than 30%, as the exec made an appearance in the late-night comedy show, which drove its price to $0.498, at the time of writing. It appears plugging Dogecoin on SNL did not work out. So much for mainstream exposure.

Dogecoin [DOGE] Price Chart:

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Dogecoin fails to impress grayscale's Barry Silbert; DOGE creator hits back 6

Musk toying with the cryptocurrency market has left many well-known players in the industry fuming. The US regulators have applied more cautiousness but lacked significantly when it came to providing regulatory clarity because of its lack of political decisiveness surrounding this space.

Hence, many crypto advocates have not been shy in calling the tech giant for Dogecoin’s recent boom and a potential subsequent bust that could rock the market and not in a good way.

The latest one to chime in was Barry Silbert, who happens to be the Founder and CEO of Digital Currency Group [DCG], owner of Grayscale Investments. He urged cryptocurrency investors to convert their Dogecoin to Bitcoin in a recent tweet.

“Okay $DOGE peeps, it’s been fun. Welcome to crypto! But the time has come for you to convert your DOGE to BTC.”

Silbert also revealed that his firm has gone short on DOGE via FTX cryptocurrency platform. The exec further pledged to donate $1 million to a charitable cause selected by the Dogecoin community if DOGE hits $1 by the end of this month.

But the co-creator of Dogecoin, Billy Markus was quick to point out Silbert’s association with a prominent crypto news portal and stated,

Grayscale Total Assets Under Management Reaches $50 Billion

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Investment giant, Grayscale has reached a new milestone of $50.6 billion in cryptocurrency assets under management [AUM] on the 14th of April. The AUM figure has been quite impressive, increasing by an incredible 2,400% from a mere $2 billion at the beginning of 2020.

The Grayscale Bitcoin Trust [GBTC] continued to dominate the charts and accounted for a whopping $41.44 billion, while the Ethereum Trust [ETHE] trailed behind with $7.42 billion followed by the remaining trusts, including Litecoin trust [LTCN], Ethereum Classic Trust [ETCG], and Bitcoin Cash [BCHG], with $405.5 million, $267.4 million and $234.3 million respectively.

Grayscale has witnessed a rise in its total AUM figure by over $3 billion right after its plan to further diversify its crypto-trust offerings that involved the addition of five new tokens for their eligible accredited investors.

Grayscale Bitcoin Fund [GBTC] Vs GLD fund 

With the latest surge, the asset manager is inching closer to the largest Commodities ETF, the SPDR Gold Trust GLD which has $57.70 billion in assets. And there are certain industry experts that speculated this could happen soon. Senior Commodity Strategist, Mike McGlone, for one, believes that the firm’s Bitcoin Trust would eventually overtake the most popular gold-pegged ETF SPDR Gold Trust [GLD] in the coming days. His tweet read,

“Bitcoin Trust on Track to Surpass World’s Largest Commodity ETF – In a world going digital, we believe gold symbolizes the diminishing potential for sustained commodity-price advances, notably vs. Bitcoin. The crypto is a prime example of how advancing innovation suppresses.”

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Grayscale Total Assets Under Management Reaches $50 Billion 8

Grayscale had announced its plans of converting its main product GBTC into an ETF. Hence, if approved, this would make the platform accessible to an even wider section of investors at a much lower cost. While the SEC is yet to give a green light to such an investment offering, but if approved Grayscale would easily become the second-largest commodity ETF just behind the SPDR Gold Shares.

The world’s largest cryptocurrency has surfaced as the growing choice of market participants around the world. This, in turn, prompted North American regulators to approve a few Bitcoin ETFs. As opposed to the Bitcoin’s bull season, Gold, on the other hand, has continued its downtrend starting after the first quarter of 2020.