grayscale

SEC officials meet again with spot Bitcoin ETF filers

Meetings between asset managers and the SEC intensified over the previous weeks, with Gary Gensler’s team meeting with BlackRock and Hashdex representatives.

The United States Securities and Exchange Commission has held a new round of discussions with asset managers proposing a spot Bitcoin (BTC) exchange-traded fund (ETF) in the U.S., this time with officials from Gary Gensler’s office participating in the meetings.

Based on court filings, the regulator received representatives from BlackRock on Dec. 14 to discuss the proposed rule change that would enable the crypto investment vehicle to be traded on major exchanges. According to Bloomberg ETF analyst Jayme Seyffart, this is the third meeting between BlackRock and the SEC to review the application.

Meetings between asset managers and the SEC had intensified over the previous weeks. On Dec. 8, Grayscale and Franklin Templeton also sat down with regulators to go over their applications, a day after representatives of Fidelity appeared before the SEC.

Read more

Gensler hints Grayscale ruling forced SEC to take ‘new look’ at Bitcoin ETFs

The SEC chair could be softening his stance on Bitcoin ETFs following the Grayscale court victory, but if so, he hasn’t admitted it outright.

United States Securities and Exchange Commission (SEC) chair Gary Gensler has hinted that the regulator has been rethinking its approach to spot Bitcoin (BTC) exchange-traded products following a recent Grayscale court decision.

Speaking to CNBC on Dec. 14, Gensler was questioned about the long list of pending spot Bitcoin exchange-traded fund (ETF) applications. He said the SEC has “between eight and a dozen filings” going through the process at the moment.

“We had in the past denied a number of these applications,” he said before adding that the courts have weighed in on that. What followed was a statement suggesting that the agency could be changing its tack on Bitcoin:

Read more

SEC pushes deadline to decide on Grayscale spot Ether ETF

The commission said it will have until January 2024 to reach a decision on the spot Ether investment vehicle or institute proceedings to extend the deadline again.

The United States Securities and Exchange Commission has delayed its decision on whether to approve or disapprove of a spot Ether (ETH) exchange-traded fund, or ETF, offering from asset manager Grayscale.

In a Dec. 5 notice, the SEC said it would designate a longer period on whether to approve or disapprove of a proposed rule change that would allow NYSE Arca to list and trade shares of the Grayscale Ethereum Trust. The commission’s announcement was one of the first following an appellate court ordering the SEC to review Grayscale’s Bitcoin (BTC) ETF offering in October.

“The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein,” said the SEC. “Accordingly, the Commission […] designates January 25, 2024, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.”

Read more

Grayscale Bitcoin Trust aims for ETF shift to narrow discount

This move seeks to better synchronize GBTC’s shares with the real Bitcoin price and introduce a streamlined mechanism for investors to create or redeem shares effortlessly.

Grayscale, a significant player in digital asset management, has expressed enthusiasm about the potential transformation of its Grayscale Bitcoin Trust (GBTC) into a Bitcoin ETF.

The company’s chief legal officer, Craig Salm and chief financial officer, Edward McGee, revealed the details.

ETF analyst Eric Balchunas from Bloomberg observed the notable dependence on Regulation M (Reg M) relief.

Related: SEC solicits comments on Fidelity’s spot Ether ETF application

With Bitcoin (BTC) currently priced at $39,481 and a surge in trading volume indicating heightened trader interest, the prospect of a spot Bitcoin ETF ensures investors a more precise representation of Bitcoin’s value through GBTC and establishes a safer avenue for institutional investors to engage with Bitcoin.

In a Nov. 28 X (formerly Twitter) post, Bloomberg ETF analyst James Seyffart said the SEC delayed its decision on the applications 34 days earlier than the Jan. Seyffart and his colleague Eric Balchunas had placed 90% odds on spot Bitcoin ETF approvals by Jan.

Magazine: Bitcoin ETF optimist and Worldcoin skeptic Gracy Chen: Hall of Flame

Read more

Metalpha raising $100M to offer Grayscale Bitcoin products in Hong Kong

Metalpha has secured $20 million out of the planned $100 million for its new fund from overseas Chinese investors, the CEO said.

Hong Kong-based cryptocurrency wealth manager Metalpha Technology is working to offer new entry points into Bitcoin (BTC) and Web3 to investors in Asia.

Metalpha is raising a $100 million fund to invest in Bitcoin and other crypto products from the major United States-based crypto asset manager, Grayscale Investments. The new fund aims to help Chinese investors get a regulated channel to invest in cryptocurrencies and Web3, Bloomberg reported on April 12.

Known as the Next Generation Fund I, Metalpha’s upcoming investment project is launched in partnership with NextGen Digital Ventures. The fund will invest directly in Grayscale’s crypto investment products and indirectly through structured derivatives related to Grayscale’s products, allowing institutions and high-net-worth individuals to get indirect exposure to crypto.

According to Metalpha founder and CEO Adrian Wang, the company has secured $20 million for its new fund since March. He said that the fund had attracted many Chinese investors, stating:

“A lot of our clients are family offices with traditional backgrounds, rather than pure crypto or pure Web3 native investors […] It’s overseas Chinese institutions — some of them are family offices, some of them are public companies.”

Wang also noted that Metalpha had seen increased demand for its products recently, which followed a series of difficulties connected to the bear market of 2022 and the collapse of the FTX crypto exchange. “A lot of clients hesitated to place new orders, but now it’s getting much better,” Wang stated, adding that a lot of new traffic is coming in, and people are gaining more confidence now.

Related: Chinese state insurance firm launches two crypto funds in Hong Kong: Report

Founded in 2015, Metalpha was initially known as Dragon Victory International, offering supply chain management platform services and cryptocurrency derivatives product services in Hong Kong. The firm rebranded to Metalpha in late 2022, soon after receiving a Nasdaq notification regarding minimum bid price deficiency. Metalpha regained compliance with Nasdaq’s listing rules as of April 2023.

Metalpha is backed by Singapore-based venture capital firm Antalpha, which has been reportedly working with the Chinese crypto mining firm Bitmain to offer low-interest loans to crypto miners.

Magazine: Asia Express: US and China try to crush Binance, SBF’s $40M bribe claim

Institutions ‘extremely interested’ in crypto ETFs, but buying has cooled: Survey

Almost half of the fund managers surveyed plan to add crypto ETFs to their portfolio in 2023, but only a quarter will be increasing digital asset exposure.

Institutional interest in cryptocurrencies hasn’t budged despite the market being down 60% from its all-time highs, as a majority of asset managers stated they’re “extremely interested” in crypto-themed Exchange Traded Funds (ETFs).

On April 3, financial services firm Brown Brothers Harriman (BBH) released its 2023 Global ETF Investor Survey, which polled 325 institutional investors, financial advisers and fund managers from the United States, United Kingdom, Europe and China.

It found nearly three-quarters of institutional investors claimed they’re “extremely” or “very” interested in crypto ETFs, but the effects of crypto winter appear to have chilled their appetite. Only a quarter said they’re expecting to increase allocation to crypto ETFs over the next 12 months, a 6% fall from 2022.

While crypto-themed ETFs fell down the priority list for some, nearly half still plan to add crypto ETFs to their portfolios this year to diversify investments.

58% of fund managers in China are looking to add crypto ETFs to their portfolios, followed by the U.S. (55%) and Europe (29%). Source: BBH

BBH explained the rise in interest for crypto ETFs is partly due to fund managers learning to stomach the inevitable volatilities in the crypto market:

“As investors adapt to volatility, they are diversifying their portfolios and adding more innovative products. Even with a tumultuous year in crypto, interest hasn’t cooled entirely.”

BBH believes a clearer crypto regulatory framework will further increase the demand for related ETF exposure as it will provide more “comfort” when doing business with the crypto sector:

“Initiatives such as the draft regulation from the EU’s Markets in Crypto Assets proposal is expected to significantly ‘derisk’ investments in crypto assets for asset managers and provide an ‘additional layer of comfort’ for fund managers to engage with crypto exchange.”

More than 40% of the respondents claimed to manage assets worth more than $1 billion and over half said to have more than a quarter of their portfolio invested in ETFs.

Related: Samsung investment arm to launch Bitcoin Futures ETF amid rising crypto interest

Among the largest crypto ETFs are ProShares Bitcoin Strategy (BITO), available on the New York Stock Exchange (NYSE), and the Bitwise 10 Crypto Index Fund (BITW). BITO was reportedly the first bitcoin-linked ETF launched in the United States, while BITW tracks the top 10 largest cryptocurrencies by market cap.

Grayscale’s Bitcoin Trust (GBTC), while not an ETF, is one of the largest digital asset investment products by market cap traded on a stock exchange, with a current value of $11 billion according to Google Finance.

Not all crypto ETFs have fared well, as the effects of the crypto market winter saw two Australian crypto ETFs — BetaShares Crypto Innovators ETF (CRYP) and Cosmos Global Digital Miners Access ETF (DIGA) — take the title as the worst-performing ETFs in the country.

This resulted in DIGA, along with Cosmos Purpose Ethereum Access ETF (CPET) and Cosmos Purpose Bitcoin Access ETF (CBTC), being delisted at the end of 2022.

Magazine: Crypto winter can take a toll on hodlers’ mental health

Post-Merge Ethereum: Grayscale extends review of ETHPoW decision

Grayscale will take 180 days at max to decide whether, when and in what manner to sell ETHPoW on behalf of the record date shareholders.

Cryptocurrency investment firm Grayscale Investments is taking more time to decide whether it should acquire and sell post-Merge forked Ethereum tokens.

Grayscale announced on March 16 that the company intends to extend the review period for evaluating the market environment to determine whether it can acquire EthereumPoW (ETHW) tokens — the forked asset that emerged after Ethereum’s Merge in September 2022.

During the review period, the firm also aims to decide whether, when and in what manner Grayscale may sell ETHW on behalf of the record date shareholders. “Such review period is not currently expected to exceed 180 days from the date hereof,” Grayscale noted in the announcement.

Grayscale reasoned the extension of the review period to the ongoing uncertainty regarding the support of ETHW tokens by digital asset custodians and trading venues. “If digital asset custodians do support the ETHPoW tokens and/or trading markets do develop, it is expected that the ETHPoW token’s value will fluctuate widely for some time,” Grayscale said, adding:

“It is not possible to predict whether Grayscale, as agent, will be able to acquire the ETHPoW tokens or the value, if any, that Grayscale, as agent, will be able to realize from sales of the ETHPoW tokens.”

Ethereum, currently the second-largest blockchain network by market value after Bitcoin, completed the Merge, a major consensus upgrade in September 2022. The upgrade moved the Ethereum network from proof-of-work (PoW) to proof-of-stake (PoS) consensus algorithm. As some people in the Ethereum community were willing to keep using the mining-based PoW Ethereum model, Ethereum has forked into two different blockchains, the main PoS-based Ethereum and EthereumPoW.

The emergence of ETHW has brought a significant challenge for crypto investment firms offering exposure to Ethereum because some investors might want to have exposure to ETHW. Some companies, such as the European exchange-traded product (ETP) issuer ETC Group, decided to launch a new ETP providing exclusive exposure to ETHW.

Related: Coinbase expects high demand for ETH unstaking with Shanghai upgrade

“The new ETP seems better because we just don’t know what will happen whether ETHW will succeed or not,” ETC Group founder Bradley Duke told Cointelegraph in September 2022.

In September, Grayscale announced that its two Ethereum-related products, the Grayscale Ethereum Trust and the Grayscale Digital Large Cap Fund, declared a distribution of rights to ETHW. Each product received the tokens as a result of a fork by late September.

Crypto Biz: Silvergate shutting down, Alameda suing Grayscale

Negative headlines surrounding Silvergate dragged Bitcoin’s price below $20,000. Meanwhile, bankrupt Alameda is planning to sue Grayscale and its parent company DCG.

With the Bitcoin (BTC) halving more than a year away, don’t expect crypto industry narratives to change anytime soon. Nay, crypto winter is still in full force, and the nasty headlines show no signs of abating. 

This week, Silvergate Bank’s parent company announced it would shut down and liquidate the crypto bank “in light of recent industry and regulatory developments.” This hardly comes as a surprise after most of Silvergate’s high-profile partners abandoned the company when the regulators came knocking.

The latest Crypto Biz newsletter documents the voluntary liquidation of Silvergate, a new lawsuit from Alameda Research targeting the Digital Currency Group (DCG), and “stale” Tether allegations from The Wall Street Journal.

Silvergate Capital Corporation will ‘voluntarily liquidate’ Silvergate Bank

After months of uncertainty, Silvergate Bank’s parent company announced on March 8 that it would unwind its operations and liquidate its remaining assets. While this marked another blow to the crypto industry, the writing was already on the wall for Silvergate Bank. According to reports, Silvergate Bank had been negotiating with the Federal Deposit Insurance Corporation (FDIC) to avoid a shutdown. Apparently, those talks went nowhere. Like other crypto firms, Silvergate’s troubles began with the meltdown of FTX and ended with regulators investigating the bank’s alleged involvement in Sam Bankman-Fried’s doomed empire. By the time Silvergate went under, companies like Coinbase, Paxos, Gemini, Galaxy Digital and BitStamp had already cut ties.

Alameda Research files suit against Grayscale over ‘self-imposed redemption ban’

Here’s a headline you probably weren’t expecting: Bankrupt Alameda Research is suing Grayscale Investments and its owner, the Digital Currency Group, for its exorbitant fees and refusal to unlock shareholder redemptions. The lawsuit, filed in Delaware, alleges that Grayscale charged over $1.3 billion in management fees, supposedly violating trust agreements. The company also “contrived excuses” to prevent shareholders from redeeming their shares. The lawsuit seeks to “unlock $9 billion or more in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts […] and realize over a quarter billion dollars in asset value for the FTX Debtors’ customers and creditors.” These sorts of allegations against DCG and Grayscale are nothing new. In January, Bitcoin billionaire Cameron Winklevoss accused DCG CEO Barry Silbert of orchestrating “a carefully crafted campaign of lies” to hide a hole in an associated company’s balance sheet.

Bitcoin ASIC manufacturer Canaan saw 82% revenue drop in Q4

In another sign of the times, Chinese Bitcoin miner and manufacturer Canaan reported a massive drop in revenue during the fourth quarter. The company’s sales plummeted 82.1% year-over-year to $56.8 million. During the quarter, Canaan sold 1.9 million terahashes per second worth of computer power for Bitcoin miners, down 75.8% compared to a year ago. Regarding profitability, Canaan was deeply in the red for the quarter — reporting a loss of $63.6 million. Overall, Canaan appears healthy enough to withstand a crypto winter that could last for the rest of the year. The company currently has $706 million in total assets against $67 million in liabilities.

Tether strikes at WSJ over ‘stale allegations’ of faked documents for bank accounts

Here’s how you know the bear market isn’t over: Mainstream media’s attacks against stablecoin issuer Tether show no signs of letting up. If you’ve been in crypto long enough, you know that Tether is the industry’s favorite conspiracy theory because people love to doubt the company’s collateral, the make-up of its reserve holdings and its association with crypto exchange Bitfinex. This week, a familiar Tether foe alleged that the stablecoin issuer faked documents and used shell companies to access the banking system. According to The Wall Street Journal, Tether and Bitfinex faked sales invoices and transactions as part of a ploy to open bank accounts. On the same day the report was released, Tether fired back, claiming the story was based on “stale allegations from long ago,” and “wholly inaccurate and misleading.”

Before you go: How will the Silvergate implosion impact crypto?

The fallout from the FTX collapse continues to impact crypto markets. Now, crypto-friendly lender Silvergate Bank is on the brink of insolvency after reporting a $1 billion net loss in the fourth quarter. That’s not the worst of it, though. Several major crypto companies, including Coinbase, Circle, Paxos, Galaxy Digital, MicroStrategy and Tether, have distanced themselves from the company as the United States Department of Justice investigates its involvement in the FTX debacle. On this week’s Market Report, I sat down with fellow analysts Marcel Pechman and Joe Hall to discuss how Silvergate could impact crypto sentiment. You can watch the full replay below.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto, delivered directly to your inbox every Thursday.

Judges hear oral arguments in Grayscale suit against SEC over BTC spot ETF rejection

A panel of three judges heard the sides’ arguments and posed significantly more questions about the SEC’s stance, leading to speculation about their leaning.

A panel of judges heard oral arguments in the Grayscale Investments suit against the United States Securities and Trade Commission (SEC) on March 7. Grayscale is challenging the SEC order not to approve Grayscale’s application to create a Bitcoin (BTC) spot exchange-traded fund. The SEC issued its order on July 6.

Former solicitor general Donald Verrilli Jr. represented Grayscale and SEC senior counsel Emily Parise spoke for the SEC before Chief Judge Sri Srinivasan and Judges Neomi Rao and Harry Edwards in the District of Columbia Circuit Court of Appeals. Verrilli opened, saying:

“The fundamental problem with the order is that it contradicts previous SEC orders giving the green light to Bitcoin futures ETPs that pose the same risk of fraud and manipulation and have in place the same CME [Chicago Mercantile Exchange] surveillance mechanism to protect against those risks.”

The SEC has approved investment products from Teucrium, ProShares, VanEck and Valkyrie linked to BTC futures.

Parise argued that the offerings are not comparable with the Grayscale proposal because the surveillance mechanisms are not identical, as the spot markets underlying the asset in the proposed ETF are “fragmented and unregulated,” unlike the CME, which is regulated by the Commodity Futures Trading Commission (CFTC).

Parise went on to dismiss the argument that the Bitcoin spot and futures markets move together 99.9% of the time, pointing out that it is unclear whether the futures market leads the spot market when impacted by fraud and manipulation, or vice versa.

Related: GBTC approval could return a ‘couple billion dollars’ to investors: Grayscale CEO

For the proposed Grayscale product, CME surveillance would serve as a proxy for surveillance of the spot market. Furthermore, the 99.9% correlation is based on “once-a-day” futures prices, irrespective of intraday prices, Parise added.

The judges addressed more questions to Parise than to Verrilli, leading crypto community commenters to interpret their leanings as favorable to Grayscale. They asked for elucidation, for example, on how Teucrium’s product that received SEC approval differs from Grayscale’s, and why spot and futures markets might be impacted differently by fraud and manipulation.

Alameda Research files suit against Grayscale over ‘self-imposed redemption ban’

The FTX debtors want to “unlock” $9 billion in share value and management fees that they dispute through the Delaware Court of Chancery.

Alameda Research has filed suit against Grayscale Investments in the Court of Chancery in the State of Delaware, it announced on March 6. The bankrupt cryptocurrency trading firm also made claims against Grayscale CEO Michael Sonnenshein, Grayscale owner Digital Currency Group (DCG) and the group’s CEO Barry Silbert. 

Alameda Research is an affiliate debtor of FTX, which filed for bankruptcy in November. The suit seeks to “unlock $9 billion or more in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts […] and realize over a quarter billion dollars in asset value for the FTX Debtors’ customers and creditors,” according to a statement.

The plaintiff claimed Grayscale charged over $1.3 billion in management fees in violation of trust agreements. In addition, it “contrived excuses” to prevent shareholders from redeeming their shares in what the statement described as a “self-imposed redemption ban.” As a result, the statement continued, the Trusts’ shares trade “at approximately a 50% discount to Net Asset Value.” Therefore, the plaintiff claimed:

“If Grayscale reduced its fees and stopped improperly preventing redemptions, the FTX Debtors’ shares would be worth at least $550 million, approximately 90% more than the current value of the FTX Debtors’ shares today.”

According to the Financial Times, Alameda owns 22 million shares in Grayscale’s Bitcoin (BTC) Trust and 6 million shares in its Ether (ETH) Trust.

Related: Digital Currency Group’s Genesis implosion: What comes next?

The Court of Chancery describes itself as “a forum for the determination of disputes involving the internal affairs of […] Delaware corporations.” Fir Tree Capital Management filed a suit in the same court seeking similar remedies in December. 

DCG’s lending branch, Genesis Global, filed for bankruptcy on Jan. 19. Grayscale has sued the United States Securities and Exchange Commission over the latter’s decision to deny Grayscale’s application to create a Bitcoin spot exchange. Oral arguments in that case will be heard March 7 in the District of Columbia Court of Appeals.

A spokeswoman for Grayscale called the suit “misguided” in a statement to Cointelegraph.