Topic: Everything you wanted to know about Grayscale BTC Trust but were afraid to ask! - page 12. (Read 16372 times)

remember exchanges are red flagging suspect coins according to regulation policy. same said policy created by the financial action task force. the same teams that enforced financial task forces to seize the coins years prior. 

exchanges would accept coins deposited from known government agencies even with grandfathered taint of silk road
because the government had now whitelisted those coins by seizing them

as for greyscale. though i see the SEC dragging its feet. i also see grayscale not really sprinting to a finish line.. they to are treading water and sinking with each season that passes..

i still think that it will be a big institute like blackrock or jpmorgan that will get first mover advantage of a spot ETF. once the SEC have been lobbied by the right types of banker people to form the right walls to monopolise the market

Couldn't agree more with this sentiment, I think you nailed it. Although not 100% convinced about the first mover advantage, as I imagine there would otherwise be more reputable companies offering ETFs than Greyscale, that's exclusively crypto-based. But I do think they are holding off as long as possible in order to get their own players at the table first. They need to hurry up if they want bear market prices though.


Hadn't thought of this, baring in mind the US Gov has been selling BTC and is planning to sell more, and not disclosing to who or where, suggests this could well be the case right now. Either way they'd be daft not to be selling OTC, as otherwise they would suffer a lot of slippage, or otherwise could take much longer to sell the coins on spot market by avoiding it. Also, would exchanges be accepting these "tainted" coins, knowing they originate from and were stolen from Silk Road? By default, I don't think so. But US Gov could certainly make an exception to a friendly institutional bank to use as an ETF reserve rubber-stamped by the SEC.

the thing about a btc ETF is that once one is approved every institutional finance company will copy the template of terms of the approved ETF to get easy sign-off and approval themselves, and so once that snowball starts there is no stopping it

my belief is the SEC wants one of its trusted boysclub wallstreet brotheren to be the first. but that means setting up the high walls of admittance to stop small players competing and starting said snowball. so SEC is delaying all it can with many reasons to not approve outsiders first, to give them more time to get all its decks shuffled and aligned and the right preferred players on the table.

after all he who gets first mover status and holds it long enough, recruits the most investment customers and once those customers are settled they wont want or need to move to other small players if all players are all pegging to the same bitcoin price and thus giving the same gains

speculation:
im just surprised that the SEC and the law enforcement that holds alot of confiscated coins are not doing OTC deals with institutional banks to fill their reserves to set up the first basket offerings .. or they probably are but just not publicised yet

Grayscale has reverted the trend in the discount, that after having peaked at -35% is back on a negative track toward -40%.

Of course, the SEC is under building pressure from Government and the public to have a clearer and definitive stance toward ETP, and ETF in particular.

Until then, I see all other initiatives, YT channel included, with little interest. The real battle is fought behind closed doors.

How quiet it has become here, let's raise the topic.

The broadcast will begin soon on the CoinDesk youtube channel (although judging by the counter on the broadcast channel, it is not clear whether it will take place or not), where Grayscale CEO Michael Sonnenshein will discuss the ongoing lawsuit of the Grayscale platform against the SEC, Sonnenshein himself expects a positive decision in favor of Grayscale by the end of Q3 this year.

A rather optimistic article about the favorable outcome of the Grayscale vs SEC trial after hearing the oral arguments of the parties in court, it seems that the judges favor Grayscale because of the contradictory position of the SEC, as a result, it is possible that the conversion of the ETF may occur earlier.

Source: https://seekingalpha.com/article/4589276-grayscale-bitcoin-trust-etf-conversion-could-happen-sooner-than-expected
There is a subscription, so you can read from the archive: https://archive.is/hcPTL

one thing the regulators are confused about is.. if bitcoin is a asset or a commodity

my opinion
because a commodity is a raw product used to make other products
bitcoin used with legacy addresses are treated as assets not commodities due to lack of 'locking mechanism's in legacy to peg coins to other networks for tokenisation(new products)
thus segwit funded btc is used to then peg to subnetworks for tokenisation(new units of measure)
meaning segwit funded btc can be treated as commodities. but not legacy funded btc

so when funds are locked to trusts using legacy its a asset trust.
when stored on segwit its a commodity trust.

if the analysis of GBTC trust custodian is to be believed. the coins are on a legacy store
https://pbs.twimg.com/media/FiAX83OXEAAbKxf?format=jpg&name=medium
meaning its an asset trust. thus SEC remit. not CFTC remit

so its the SEC that should be approving it. not the CFTC

gensler(SEC) wants to make bitcoin be treated as a commodity. even though we all know certain assets and currencies can be on different regulators hands depending on how its treated

yep
gold traded for industry to make electric devices and jewellery. and also 'futures' is on the CFTC market
but gold for investment is regulated by the SEC

The case of the SEC seems pretestuoso to me.
The CFTC declared Bitcoin Futures a tradable assets years ago, and the decided the spot price is liquid enough to settle a multibillion open interest on that price.
But the SEC refutes this thesis.

I want Grayscale to call the CFTC to testify it!

Grayscale has distributed a transcript of the meeting of the  D.C. Circuit Court of Appeals on Grayscale's lawsuit against the SEC to challenge the SEC's refusal in an application to convert GBTC into a spot Bitcoin ETF. which took place on March 7, 2023. Oral arguments of the parties were heard at this meeting. Grayscale was represented by attorney Donald B. Verily Jr., a partner at Munger, Tolles & Olson, and Emily True Parise represented the SEC.
 
The main arguments of the parties:
 
The SEC stated that the refusal was intended to prevent the impact of fraud and manipulation in the spot market on CME futures, as well as the possibility of manipulation within the ETP itself.

Grayscale adhered to the opposite side and believes that we will not be able to determine that the ETP market for bitcoin spot will not have such a powerful effect on the price of the CME futures market and that in fact they completely contradict each other.

After both sides had been heard, Chief Justice Srinivasan announced that the case would be heard.

The transcript of the meeting is available here: https://grayscale.com/gbtc-litigation-oral-arguments-court-transcript/
You can listen to the audio recording from the courtroom here: https://www.youtube.com/watch?v=VDUKyMPTIIE&t=2160s

the on the surface court claim.. is not about the bankruptcy..
its about grayscale customer sueing its invested service

however outside the court claim it is definitely about the whole asset recovery /bankruptcy thing


DCG/grayscale know that john ray III has the bankruptcy tools to "claw back" so they know its about trying to get back max assets via that tool.

but the court case is just phase one of that.
grayscale cant use the "your investment is nothing to do with bankruptcy" at this point, thats for subsequent things later

i feel the hope by alemeda is that grayscale just settle-up with alemeda

..
one thing i am unsure of is WHEN alemeda bought into GBTC
as that might then show if there was a significant amount of ftx customers funds LOCKED into GTBC which would have caused the bankruptcy. or if this was a small purchase pre 2021 when prices were low. where the now ~$280m locked was originally an insignificant amount/pre the co-mingling of customer funds saga of ftx

I'm aware that it's not SBF and associated conspirators in charge anymore, but to me the lawsuit still came across as opportunistic rather than realistic, even if it turns out to be a plausible argument.
That said, it seems you know a lot more about bankruptcy law than me, so in that respect I'll take your word for it regarding your insight in the case, as you make some very good points...


Fair enough, that was something I wasn't aware of, and effectively the type of bankruptcy cause I was referring to and didn't think existed
(even if not written into contract, but exists in a clause on it's merit as it were)


If they have this defense in the bag then no doubt they'll use it successfully. They seem confident that the law suit is nonsense at least.
Either that or they simply know it's worth fighting as don't want to have to deal with taking the L by refunding shares I guess...

just to note..
alemedia is no longer/not managed now by 'scam bankrupt fraud'
its now managed by independent accountants/lawyera with licence under regulation of bankruptcy law

thus dont think of it as scammy alemeda trying to scam more
think of it as regulated lawyer/accountants reclawing assets using bankruptcy law

keep this in mind as you read what i say next. and any other future alemeda drama


yes normal customers abide by the service agreement of the company. meaning no recourse of redemption becasue they agreed to buy shares that have terms applied

however.
in regards to bankruptcy
if a now bankrupt company deposited illicit/stolen/abused funds into company X. by law that amount needs to be clawed back from company X at the deposited value/price

this then breaches/supersedes any company X service agreement because bankruptcy law reigns superior to business policy
so alemeda liquidators are trying to claw back initial investment from grayscale. not trying to sell shares to open market on OTC
(obviously if the assets were worth more now compared to initial deposit they would happily sell shares on OTC and now use the "claw back" tool of bankruptcy law)




coinbase and grayscale are not real customers of each other.. they are corporate sisters. thus have different systems and treatment compared to how coinbase treats real customers
EG no point in coinbase charging grayscale 2% if that 2% goes back to DCG
would you charge yourself 2% to yourelf.... nope


cant sue if its "not their fault" grayscale are saying the hold up is due to law/sec. thus not grayscales fault
(although yes grayscale promised an etf)
also grayscale offered the OTX swap of share ownership thus giving users an escape.. although that escape involved passing on the headache to a noob investor



yes users signed a user agreement with terms
normal users cant fight it.. heck even grayscales terms say users cant sue them and instead have to use a mediator to arbitrate disputes.

but when it comes to bankruptcy law and the tools available to legally claw back assets. that instance is outside of the business service agreement policy


bankruptcy law supersedes business service agreement policy
its not that grayscale needs to put in clauses .. its that bankruptcy law of clawbacks is outside and above grayscales service agreement

---

now with all that said
the bankruptcy tool of "clawback" is a law that has more power then grayscale business policy

meaning alemeda has a claim to clawback the funds it gave grayscale

however
grayscale "could" use a defense that:
the deposit/investment into grayscale pre-dates the criminal acts of alemeda that resulted/consequential to cause the bankruptcy

in short the investment has no relation/result/cause related to the bankruptcy so are not part of any claw back scope of use of such tool

I get that, my point is that the law suit is likely hot air. Ie they have no right to redeem their shares directly from Greyscale, instead have to dump on secondary market. It's all very dodgy, that I'm not denying. I just imagine there's small print covering Greyscal legally right now and effectively investors got what they paid for: shares without the guarantee of redemption until an ETF is approved.


Agreed, it's almost certainly Coinbase or similar big entity that hold the shares.


Apart from to Coinbase Custody that is. At least 1% I imagine as a special deal on a large holding.
(As far as I'm aware Coinbase charge a lot for custody than 2%)


Again I doubt they "promised" an ETF, as otherwise everyone would be suing them for failing to provide - not just Alameda.
I otherwise don't see how they would be getting a free service from the likes of Coinbase in a hurry.


What they should and shouldn't be doing isn't the point here, it's about the letter of the law. Of course they should have allowed redemptions all along, then there wouldn't be such a discount.

The fee is otherwise the custody of Bitcoin in exchange for shares, so I'd say they are probably entitled to charge what they want for that, it's up to investors to decide whether they feel it's fair, not to determine how much it should cost them. Even if they "shouldn't be" charging a fee, if investors sign contracts accepting such terms, then they have no legitimate claim against Greyscale is bottom line.


It sounds like investors got greedy buying at a premium, but now don't want to sell at a discount. I'm really not surprised!
The premium was never a guarantee right? Hence a parity price wouldn't have been a guarantee either...
Clearly the discount is about lack of ETF that was expected years ago, not much else.


Not arguing it's not one step away from a ponzi, to me it just seems like the game of speculation. Investors spent years speculating on an imminent ETF and bought at a premium, then spent the last couple of years speculating on there not being an ETF and instead bought/sold at a discount. If an ETF does get approved by SEC, then I don't doubt the discount will evaporate.

Overall, I have little sympathy for GBTC holders, they got exactly what they paid for. Paying a premium with a fee anticipating an ETF, or otherwise selling at a discount as there is no ETF. If they wanted to hold Bitcoin then that's what they should have bought, not effectively an asset that speculates on a Bitcoin ETF from Greyscale - that I'm certain they never promised, because obviously they can't.

That might sound harsh, but GBTC holders should really have read the small print here. Just because Greyscale intended to convert GBTC into an ETF, doesn't mean it was/is going to ever happen. In summary, the reason I say the Alameda law suit is hot air is because this isn't about "right and wrong" this is about "legal and illegal", so arguing the former has no place in regards to this court case.

Unless there is some bankrupty clause in these contracts (which I doubt there is), then Alameda won't be getting a dime from Greyscale. They will just have to suck it up and dump for a 34% discount on secondary market. Of course knowing that they would be geting 50% more value from their holdings is why they are "trying it on" with Gresycale, no other reason imo.

OR
other possibility
another business buys out grayscale as the "sponsors" of the shares. and takes over the management

..
some people believe that grayscale should not have pre-sold shares of a product they have not been able to offer for many years. (much the same as pre-selling pre-mined coins of an ICO)

where by the SEC might actually make a decisions to demand that grayscale offer 100% redemption or lose its other financial licencing permits

EG if tesla were doing pre-orders for cars. but the department of transport were refusing to validate the safety status of tesla cars, thus not allowing tesla to produce/sell cars..
eventually the department of transport could say "these cars will never be good enough for the road so tesla need to offer refunds and recall any prototypes currently on the road"

The main issue is that this good trade (for Grayscale) will go on until the spot ETF is approved. Hence I see little chance of it happening in the short term.

according to the financial times alemeda bought 22m shares of GBTC
so not hot air(they have skin in the game)

part of the FTX/alemeda bankruptcy is to claw back all invested value held elsewhere to liquidate it for repayments to ftx/alemeda customers

so if grayscale are not allowing redemptions. they are preventing the clawbacks of 22m of shares, currently valued today at $12.90/share *22m= $283.8m value

..

heres what i think
grayscale is not actually managing the custody of the locked btc in trust... coinbase does
so grayscale has no large overheads/labourcosts of "managing trust"
grayscale is not offering its promised ETF right now thus there is no overhead/labour cost of running an ETF
thus grayscale should not be implying that it should take its 2% management fee if its not offering the services that the fee's imply to cover

as for the redemption part
grayscale took in value at premium(initial share by from grayscale years ago).. but now tell people to fight with each other on another platform between themselves to trade out at discount(loss) via OTC

where by grayscale are the winners but their customers are the losers. whether the customers hold(and pay fee) or sell at loss(discount) to another novice customer who thinks they are getting in on a good deal
almost like one step away from a ponzi

At the same time, Alameda Research is now trying to sue Gresycale over ‘self-imposed redemption ban’:

https://cointelegraph.com/news/alameda-research-files-suit-against-grayscale-over-self-imposed-redemption-ban

But if I had to guess, this law suit is likely a lot of hot air - a bit like Alameda's holdings: total nonsen\se.

For anyone wanting to keep an eye on the GBTC premium/discount (as didn't see it referenced in OP):

https://ycharts.com/companies/GBTC/discount_or_premium_to_nav

If it get's back into a more reasonable 10-25%, this could well be good for Bitcoin if there are investors willing to take a risk that with an ETF approval, they'd be getting a discount on Bitcoin. Not forgetting that if the discount is decreasing, then investors are buying shares of GBTC right now which is already a positive in itself. Not that I'm recommending it, as seems highly speculative right now.

grayscale expects a ruling to this in the fall..

In an unexpected move, Grayscale is up 10% on the day with a BTC down 1.5%. The discount is finally narrowing.
This is because of the court hearing of for the SEC vs Grayscale trial.

GBTC Discount Narrows to Lowest Level Since November Following Court Hearing

According to some people in social media, Barry Sibert's Digital Currency Group has $262 million in cash but they have a loan of $575 million that should be paid on May and a $1.1 billion loss through Genesis Global.

The question everyone should want to ask but they might only be afraid is DGC presently insolvent? What will happen to Grayscale?



The venture capital firm focused on cryptocurrencies – Digital Currency Group (DCG) – reportedly marked a loss of $1.1 billion last year.

Some of the primary reasons for the downfall were the collapse of the crypto market and the bankruptcy of its subsidiary – Genesis.

Source https://cryptopotato.com/crypto-giant-dcg-revealed-a-loss-of-over-1-billion-in-2022-report/