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Topic: Everything you wanted to know about Grayscale BTC Trust but were afraid to ask! - page 23. (Read 17106 times)

legendary
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Grayscale is on the attacking side against the SEC:

Grayscale Considers Flipping the Script and Suing SEC Over Bitcoin ETF

Quote
With the agency set to make a decision by July 6, CEO Michael Sonnenshein would consider suing the agency if the application is rejected. He told Bloomberg, in response to a question about a potential lawsuit, "I think all options are on the table."


This is getting more and more ridiculous.
 The SEC is being held prisoner by herself, while Grayscale is dying on their own "success", and they are probably secretly bribing the SEC not to approve the ETF.

This is a stalemate situation I can't understand how to exit from.
legendary
Activity: 2268
Merit: 16328
Fully fledged Merit Cycler - Golden Feather 22-23
Just a warning about my spreadsheet.
The bad guys at Grayscale added an anti scraping feature in their website. Hence data on the spreadsheet cannot be safely scraped.
I have to manually update the spreadsheets, that is a time consuming activity.
Waiting for help or suggestions if you are able to!
legendary
Activity: 2604
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Grayscale has unveiled its new investment product, the Grayscale Ex-Ethereum Fund (GSCPxE) smart contract platform As they say, users can now create DeFi applications, represent ownership of NFT, move funds according to conditional instructions, and even create other digital asset protocols. To date, the fund consists of the following seven tokens:
                                       Weight
Cardano             ADA     24.82%
Solana                SOL     23.41%
Avalanche          AVAX   19.11%
Polkadot             DOT    15.19%
Polygon             MATIC   9.23%
Algorand            ALGO    4.26%
Stellar Lumen      XLM    3.98%

Source: https://grayscale.com/products/grayscale-gscpxe-fund/?utm_source=product&utm_medium=email&utm_campaign=2022-03-21_product_launch-announcement_scpex&utm_content=body-hyperlink
legendary
Activity: 2268
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Fully fledged Merit Cycler - Golden Feather 22-23
As expected, the plan to buyback shares didn't have a great impact:



Discount is hovering at -30% despite the buyback program.

Note:
Sorry I am not using my own linked spreadsheet. Major disaster happened on the database, trying to recover the data loss.



EDIT:
A very interesting Tweet, linking GBTC premium and future positions:



Nothing new, the strategy of locking the premium buying GBTC shares in primary market, shorting futures  to later close the position selling the shares at a 30% premium is described in the OP, after all.


legendary
Activity: 2268
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Fully fledged Merit Cycler - Golden Feather 22-23
to be less than 0
Do you believe that Grayscale are purposefully keeping their fees on GBTC high because they have a certain amount of trapped clientele, an they are gambling upon a spot ETF will force their hands to resolve this with their thereafter conversion to a spot ETF which would then cause them to adjust fees to the appropriate ETF level, around the ballpark of 0.5%?

My idea is that Grayscale is “enjoying the ride”  of this yearly 200 bp “low effort” gain until the SEC approves a cash BTC ETF. At that point, they will be forced to switch the Trust into an ETF, consequently lowering the fees in the region of 50 bp.
They are cashing in huge BTC’s on a daily basis. They know this is going to end soon, and the NAV is way higher than market price: I suspect that the clients were already able to sell, have already done.

In addition to that, back in my head there is the possibility they are actively bribing lobbying the SEC not to approve the ETF, so that they can longer profit from this situation.
legendary
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Merit: 11105
Self-Custody is a right. Say no to"Non-custodial"
DCG is going to repurchase some GBTC shares:

Digital Currency Group Announces $250 Million Share Repurchase Program for Grayscale® Litecoin Trust (OTCQX: LTCN), Grayscale® Horizen Trust (OTCQX: HZEN), Grayscale® Zcash Trust (OTCQX: ZCSH), and other Grayscale Products

The main part of this repurchase will be amongst their publicity traded funds (GBTC is one of them) for 200 millions of usd.

I doubt this will reverse the discount trend, but it will temporarily stop the bleeding.

Back of the envelope calculations: 250,000,000 is equivalent to 6,250 BTC (btc at 40,000), or little more than 200 days of fees from GBTC only.

They are using money from customers to pay this. This nonsense wouldn’t be necessary if SEC were to approve a cash BTC ETF.

Also, proof that 200 bp management fees is too high, and doesn’t serve GBTC investors too well. A reduction in fees would be away more effective move.

Do you believe that Grayscale would feel that it would lose face/credibility if they were to lower their fees on the GBTC product?

If lowering their fees would be such a smart move, why don't they do it?   To be competitive with ETFs would their fees need to be less than 0.5%?  That would cause the discount to rectify itself?  or is something else going on?  some kind of purposeful market punishment of Grayscale/GBTC, if such a thing is possible?

Do you believe that Grayscale are purposefully keeping their fees on GBTC high because they have a certain amount of trapped clientele, an they are gambling upon a spot ETF will force their hands to resolve this with their thereafter conversion to a spot ETF which would then cause them to adjust fees to the appropriate ETF level, around the ballpark of 0.5%?

By the way, on a business level it seems that repurchasing could be a good deal in terms of getting a good deal on a discounted product.. and the BTC prices are generally down, too.. but then once they repurchase the shares, then they free those BTC from the market, no?  Does that mean that they can sell the BTC that had been associated with those shares that they repurchased?  I can recognize buying the shares to be a good deal, and I suppose selling the BTC would be an immediate profit that is the size of the discount.. so maybe they would end up selling the BTC, so their conduct would be a net selling pressure of 40k BTC onto the market, no?
legendary
Activity: 2268
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Fully fledged Merit Cycler - Golden Feather 22-23
DCG is going to repurchase some GBTC shares:

Digital Currency Group Announces $250 Million Share Repurchase Program for Grayscale® Litecoin Trust (OTCQX: LTCN), Grayscale® Horizen Trust (OTCQX: HZEN), Grayscale® Zcash Trust (OTCQX: ZCSH), and other Grayscale Products

The main part of this repurchase will be amongst their publicity traded funds (GBTC is one of them) for 200 millions of usd.

I doubt this will reverse the discount trend, but it will temporarily stop the bleeding.

Back of the envelope calculations: 250,000,000 is equivalent to 6,250 BTC (btc at 40,000), or little more than 200 days of fees from GBTC only.

They are using money from customers to pay this. This nonsense wouldn’t be necessary if SEC were to approve a cash BTC ETF.

Also, proof that 200 bp management fees is too high, and doesn’t serve GBTC investors too well. A reduction in fees would be away more effective move.
legendary
Activity: 2268
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Fully fledged Merit Cycler - Golden Feather 22-23
Another move from Grayscale.

The world's largest crypto asset manager launches a first-of-its-kind campaign to help push for SEC approval of a spot bitcoin ETF



Below the full text, because you know, paywall.
Quote

Grayscale Investments, the world's largest crypto asset manager, has launched a first-of-its-kind campaign to help push for the approval of a spot bitcoin ETF by the Securities and Exchange Commission.

The firm runs the world's largest bitcoin fund — the $25.7 billion Grayscale Bitcoin Trust (GBTC), which has seen its discount to net asset value widen in recent months. As of Friday, GBTC was trading 26.5% below its intrinsic value, according to YCharts. The fund has plunged 20.3% this year, outpacing bitcoin's 17.7% decline.

In October, The New York Stock Exchange filed an application with the SEC to convert GBTC into a spot bitcoin ETF. By converting GBTC into an ETF, the fund would become open-ended, allowing for market makers to arbitrage against the premium or discount. This process typically keeps ETFs trading in line with their true value; unlike ETFs, trusts are unable to redeem shares to adjust for varying demand levels. As such, the expectation is that the conversion would close GBTC's discount.

Earlier in the month, the agency delayed its decision on Grayscale's proposed conversion to July. As part of the SEC decision process, the agency opens up the proposal for public comment, although most of these filings remain obscure and garner few comments.

Grayscale's campaign aims to "educate and encourage" American investors to take action by sending the SEC comment letters on its ETF application during a standard 240-day review period. Nearly 200 letters have been submitted to the SEC following a Grayscale tweet on February 10.


"We are not aware of other firms who have implemented a campaign to encourage investor engagement with the SEC," Grayscale CEO Michael Sonnenshein told Insider. "In this instance, our team is ensuring that the investment community is made fully aware that they have the ability to share their views with the SEC on this historic and important decision."

Leveling the playing field
The SEC has rejected similar spot bitcoin ETF applications on the grounds that they have failed to meet its standard "designed to prevent fraudulent and manipulative acts and practices" and "to protect investors and the public interest."

The agency allowed futures-based bitcoin ETFs to come to market last November. Investor enthusiasm around the first futures-based bitcoin ETF launch not only fueled massive initial demand for the ProShares Bitcoin Strategy ETF (BITO) but also added to buy pressure on bitcoin futures contracts. BITO was down 15.8% this year, as of Friday.

Sonnenshein believes that the SEC has created an unlevel playing field by only approving bitcoin futures ETF. In November, Grayscale's lawyers at Davis Polk sent a letter to the SEC arguing that its approval of futures-based ETFs and rejection of spot-based ETFs was "arbitrary and capricious."

"The SEC's reluctance to approve spot bitcoin ETFs due to pricing or manipulation concerns in the underlying bitcoin market is arbitrary since it is that very market on which both bitcoin futures ETFs as well as spot bitcoin ETF applications, including GBTC, derive their value," Sonnenshein told Insider.

He added: "Investors' comments submitted address not only this discrepancy but also assert that the SEC is failing to protect them by continuing to deny spot bitcoin ETFs from being approved in the US market."



Nothing will make myself change the idea they are actually lobbying against the EFT, as they still cash huge BTC everyday.
But marketing is a must in these days.
legendary
Activity: 2268
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Fully fledged Merit Cycler - Golden Feather 22-23
SEC received a lot of comments for GBTC conversation into ETF:




Investors Stuck in Biggest Bitcoin Fund Flood SEC With Letters


Quote
More than 170 letters have been submitted to the agency in February following a tweet from Grayscale Investments LLC encouraging people to share their thoughts on the firm’s application to convert the $26 billion Grayscale Bitcoin Trust (ticker GBTC) into an exchange-traded fund.


legendary
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Fully fledged Merit Cycler - Golden Feather 22-23
After the SEC's request for public comments regarding the spot bitcoin ETF from Grayscale Investments. And as it turned out, if you look at the observations of Bloomberg analyst Eric Balchunas, we see that public opinion looks very positively at the Grayscale ETF, this is evidenced by the figure of 95% supporting the launch of a financial instrument.



Digging amongst the comments you can also find some weirdo having their say:




legendary
Activity: 2604
Merit: 1504
After the SEC's request for public comments regarding the spot bitcoin ETF from Grayscale Investments. And as it turned out, if you look at the observations of Bloomberg analyst Eric Balchunas, we see that public opinion looks very positively at the Grayscale ETF, this is evidenced by the figure of 95% supporting the launch of a financial instrument.


legendary
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Fully fledged Merit Cycler - Golden Feather 22-23
Regulators have fined BlockFi 100 mios:

BlockFi to Pay $100M Penalty, Stop Opening New High-Yield Bitcoin Accounts: Report

Quote
BlockFi's business model is offering customers high interest rates for locking up cryptocurrencies such as Bitcoin, Ethereum and Tether into savings accounts. The company then loans those funds out at even higher rates. But the SEC alleged in November that these BlockFi Interest Accounts, which can deliver yields in the range of 5 to 10%, are unregistered securities.


Why is BlockFi relevant in this thread?

Well, the reason is GBTC has been critical to BlockFi success, as their Business model heavily relied on then now gone GBTC premium.

Blockfi grants BTC lenders a hefty premium when investors provide the firm with BTC (other shitcoins were considered too, but let's talk about bitcoins for sake of simplicity).
Those yields were of course generated by the fact that BlockFi lent those exact BTC at higher yields.

The only subject willing to borrow BTC at an even higher yield were those plying the GBTC 2arbirtrage" between NAv and share price.

When the premium was in the region of 30% the complete scheme was the following.

  • Alice lent their BTC to BlockFi for a 6% rate
  • Blockfi lent Alice BTC's to Bob, an arbitrageur, for a 9% rate.
  • Bob used the BTC to purchase in-Kind GBTC shares at NAV.
  • Bob sells an equal amount of Futures, not to be exposed to BTC price variations. (Or short sells the GBTC shares, entering a repurchase agreement)
  • Six months passed.
  • Bob sells his now unlocked shares on the primary market.
  • Bob buys back the futures, cashing in the 30% premium (or closing the short sell with the newly unlocked shares).
  • Bob gives back the bitcoins to BlockFi
  • Bob cashes in 30%-9% as a profit.

A simple yet effective way of doing business.
The greater the NV premium, the higher the cost BlockFi could charge to arbitrageur: they were always incentivized to borrow BTC as the funding cost of this scheme surely was a fraction of the capital cost necessary to buy BTC on the spot market.


legendary
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Fully fledged Merit Cycler - Golden Feather 22-23
SEC once again delayed the decision on the GBTC conversion:

SEC again delays decision on Grayscale's bitcoin ETF conversion proposal

Quote
ADVERTISEMENT

The Securities and Exchange Commission (SEC) said Friday that it would again delay a determination on Grayscale's proposed bitcoin exchange-traded fund (ETF).


The decision was expected, thou:



Link to official statement

legendary
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Grayscale Investments has launched an ETF based on shares of companies that have added bitcoin and other cryptocurrencies
<…>

This is not the crypto related ETF we all have been waiting from Grayscale.
Disappointing, actually.
I personally don’t care about such an ETF: I think it’s a too inferior alternative to hodling the real thing, or closer looking alternatives I.e. ETP like BTCe bearing less “uncorrelated risk” to the underlying.
 
legendary
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Grayscale Investments has launched an ETF based on shares of companies that have added bitcoin and other cryptocurrencies to the product line the list of companies includes Silvergate Capital (SI), PayPal (PYPL), Coinbase Global (COIN), Block (SQ), Robinhood Markets (HOOD), Argo Blockchain PLC (ARB), Bitfarms Ltd/Canada (BITF), Plus500 Ltd (PLUS), Hive Blockchain Technologies Ltd (HIVE), Northern Data AG (NB2). Which received the GFOF ticker on the NYSE, submitted an application to launch the Future of Finance ETF Grayscale Investments in November 2021. 62.3% of the funds managed by the ETF are invested in shares of financial institutions, the remaining share is 37,% in infrastructure solutions of digital assets.

https://twitter.com/Grayscale/status/1488871646551285766
https://www.coindesk.com/business/2022/02/02/grayscale-launches-first-equity-etf-tracking-new-joint-index-with-bloomberg/
The structure and description of the Bloomberg Grayscale Future of Finance Index can be viewed here: https://assets.bbhub.io/professional/sites/10/Bloomberg-Grayscale-Future-of-Finance-Index-Fact-Sheet.pdf




legendary
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I finally was able to put my hands on that Bloomberg Report.

Here you have it.

I had to slightly edit it in order to protect my source.

Quote

GBTC 27% Discount, Leveraged Play On Spot ETF Approval
 
ETFs, Global Dashboard Bitcoin Misfortune or Opportunity? GBTC Falls to 27% Discount 
Contributing Analysts Eric Balchunas (Strategy)  (Bloomberg Intelligence) –

The Grayscale Bitcoin Trust (GBTC) may continue to face dwindling demand as its price falls faster than the value of the Bitcoin it holds, expanding its discount to more than 26%. GBTC is unlikely to convert to an ETF in the near term -- a move that would erase the gap -- but the discount offers more affordable Bitcoin exposure. (01/19/22) 1.

1.    Discount Offers Below-Market Bitcoin Exposure

GBTC's discount has weighed on shareholders for months but provides Bitcoin exposure at below market prices. GBTC closed trading on Jan. 18 at a 26.5% discount -- equivalent to buying Bitcoin for $30,870 while it's trading around $42,000. That gap will disappear if the SEC allows Grayscale to switch GBTC to an ETF. Yet we expect the SEC to deny Grayscale's conversion application, which has a final decision date of July 6.
The potential compression return would be higher than the discount: Eliminating a 26.5% discount would be analogous to a security appreciating to $100 from $73.50 -- a 36% return. This scenario excludes the risks and price movements of the underlying asset.
(01/19/22)
 

 
 
2.    Consistent Discount Hurts Shareholders; Fee a Drag
Contributing Analysts Eric Balchunas (Strategy)

Aside from converting GBTC to an ETF, Grayscale could begin a redemption program or liquidate the fund to unlock the underlying Bitcoin and narrow the steep discount. We don't expect any such move in the next few years, but either is possible if conversion fails. A detriment to holding GBTC long term is the 2% fee. Yet it currently would take more than 15 years for the fee to eat up the potential 36% return from closing the discount.
These scenarios assume Bitcoin's price remains stable, which we believe is unlikely over any time period. (01/19/22)
 

 
3.    Futures Are More Correlated Than GBTC

The ProShares Bitcoin Strategy ETF (BITO) isn't a particularly efficient vehicle for long-term Bitcoin exposure due to the costs associated with rolling Bitcoin futures. The ETF trails spot Bitcoin by 2.72 percentage points after three months of trading. A linear extrapolation would leave BITO underperforming by almost 11 points in its first year. Yet futures still offer tighter tracking of Bitcoin than GBTC shares. On Jan. 18, BITO outperformed GBTC by 4 percentage points. (01/19/22)
 

 
4.Spot Bitcoin ETF Would Offer Better Tracking

The growth of alternative Bitcoin products worldwide, particularly in Canada, helped to curb demand for GBTC shares in early 2021, leading to the persistent discount. This lack of demand worsened after the launch of U.S. Bitcoin futures ETFs such as BITO in October. Though neither product is particularly efficient for accessing Bitcoin exposure over the long term, each has pros and cons. BITO is highly correlated to Bitcoin in the near term, while GBTC has almost leveraged return potential if the SEC approves a spot Bitcoin ETF. Yet approval isn't guaranteed anytime soon, and nothing is stopping the discount from widening in the meantime.
It's also possible that the SEC will never approve GBTC's conversion to an ETF. (01/19/22)
 

 
5.Lower Fee Could Limit Exodus and Discounts

Grayscale may have to reduce GBTC's fees to remain competitive. Shrinking demand for GBTC's shares -- and its expanding discount -- stem partly from the proliferation of alternative ways to access Bitcoin, with many offered at far lower cost. We expect the discount to linger, especially after the October launch of U.S. Bitcoin futures ETFs that undercut GBTC's 2% expense ratio by more than half. BITO and BTF charge fees of 0.95% and VanEck's XBTF costs just 0.65%.
Higher fees can dramatically erode returns, as illustrated by the hypothetical growth of $10,000 at 10% annually for 20 years. Without fees, the portfolio would reach $67,275. At an annual fee of 0.49%, that total drops almost $6,000 to $61,416. Increasing the fee to 2%, like GBTC's, cuts the value vs. the free portfolio by almost one-third, to $46,610.
 

 
 
The SEC's October approval of Bitcoin futures ETFs may have forced the agency into a greater likelihood of consenting to spot-based variants in 2022, ending years of rejection. Decision documents on Teucrium and Valkyrie spot Bitcoin ETF filings under arduous SEC 19b-4 review, no matter the view, are likely to expose the agency to rulemaking violations and improve arguments for such funds. Regulators disagree with filers that there's little difference between the ETF types.
 
6. Two ETF Reviews Could Force SEC Hand in 2022

SEC 19b-4 reviews for Teucrium and Valkyrie Bitcoin futures ETFs, filed under the Securities Act of 1933 and marked in our exhibit, weren't on anyone's radar. Recent "1940 Act" Bitcoin futures and spot Bitcoin ETF filings have been the focus, but that's likely to change. Teucrium's April 8, 2022, decision deadline will be the SEC's first 19b-4 response to a futures ETF filing since it approved funds in October. The SEC's view of Bitcoin futures markets in previous responses indicates it would deny the two proposed futures ETFs, but that's unlikely now, as rejections could open the agency to Administrative Procedure Act (APA) violations on rulemaking.
Conversely, if it approves, the SEC will have to thread a tight needle stating why CME Bitcoin futures markets aren't of significant size but are good enough for ETFs. (12/23/21)
 

 
 
7. Grayscale APA Argument to Gain Strength Either Way
 
The SEC's approval of Bitcoin futures ETFs likely created an opening for issuers seeking to launch spot-oriented funds in 2022. Filers' positions are likely to be strengthened after SEC decisions on the two Bitcoin futures ETFs in 19b-4 review. As part of its 19b-4 filing to convert Grayscale Bitcoin Trust (GBTC) to an ETF, Grayscale and its lawyer Davis Polk say the SEC's stance -- favoring investment in Bitcoin futures rather than the underlying asset -- violates the APA, which requires federal agencies to treat similar situations alike, absent a rational basis for differing assessments. Grayscale's assertion that the SEC's position appears inconsistent has merit, but it's unclear whether the agency will consider that argument in its 19b-4 decisions expected in 2Q.
 

 
 
8. Spot Bitcoin ETF Issuers Have Ammo If SEC Denies
 
A denial of Bitcoin futures ETFs under the 1933 act, we believe, would strengthen calls of APA violations in the SEC's handling of spot-based fund variants. To allow one product to market that's nearly identical to another, solely because it doesn't go through the same regulatory approval process, would qualify. The agency is expected to treat like situations consistently, and there seems to be little rational basis for a differing assessment of spot Bitcoin ETFs.
The reason these ETFs can file under either act centers on U.S. law that allows a fund to classify Treasuries as a security or not. If classified as a security, a Bitcoin futures ETF can apply to list under the 1940 act since Treasuries are the collateral. ETFs approved under the 1940 act no longer go through the 19b-4 process. (12/23/21)
 

 
9. Filers' Arguments for SEC Approval Also Valid

Cboe and VanEck's 19b-4 applications argued the Bitcoin futures market is "meaningfully large" and regulated by the Commodity Futures Trading Commission, satisfying SEC surveillance criteria. Most spot Bitcoin 19b-4 filings claim similar. SEC letters don't align with this notion, saying actors could manipulate the spot Bitcoin market without trading CME futures or affecting them. This position is inconsistent with its prior approval of Bitcoin futures ETFs outside the 19b-4 process, given that the spot and futures markets are intertwined; manipulating spot prices would, in turn, affect futures. In addition, most spot Bitcoin ETFs would use a pricing methodology extremely similar to CME's calculation.
 
To approve a CME Bitcoin futures ETF under the 19b-4 process would theoretically invalidate many of the SEC's arguments. (12/23/21)
 

 
10. Diverging Views Specific to 19b-4 Process
 
Regulatory and legal technicalities underlie 7-8 years of SEC denials of spot Bitcoin ETF applicants, though we believe a reversal may occur in 2022. The agency believed approving them would subject Bitcoin to manipulation and a lack of surveillance, but has since given consent to futures oriented funds despite similar risks. Unlike the proposed spot-market funds, the approved Bitcoin ETFs fall under the 1940 act, exempt from the 19b-4 process, which puts the onus on the applicant to allay the concerns of the SEC Division of Trading and Markets.
 
Our argument from November that Bitcoin futures ETFs likely would have been rejected had they gone through the 19b-4 process is intact. The April decision deadline on the two 19b-4 applicants will force the SEC to make a move. (12/23/21)
 

 
11. CME Bitcoin Price Calculated by Aggregate of Spot Exchanges

 The Bitcoin Reference Rate used to determine the value of CME Bitcoin futures is a calculation of the prices from five spot exchanges for the crypto -- the very venues and markets the SEC deems prone to fraud and market manipulation. The proposed spot Bitcoin ETFs would be tied to similar aggregated valuation methodologies from diverse exchanges to prevent erroneous data or manipulation to affect pricing assessments. (12/23/21)
 

 
Grayscale Letter Could Morph Into Court Win for Bitcoin Spot ETF
Contributing Analysts Elliott Z Stein (Litigation)
A letter to the SEC from lawyers for Grayscale sets the table for what we think may be a successful lawsuit in favor of approving Bitcoin spot ETFs, a product the agency has rejected. The letter includes compelling arguments for why SEC reasoning is inconsistent. Such a suit can't come until the agency rejects an application, which for Grayscale might not be until July. (12/21/21)
 
12. Lawsuit Against SEC Could Succeed
 Contributing Analysts Elliott Z Stein (Litigation)
 
A lawsuit against the SEC for rejecting a Bitcoin spot ETF while allowing Bitcoin futures ETFs could succeed if filed, though it would be close because the agency gets court deference, we believe. As articulated in a Nov. 29 letter by lawyers for Grayscale, the SEC's disparate treatment of the two products is fodder for an Administrative Procedures Act (APA) violation. We think it's inconsistent and illogical (or arbitrary and capricious using the statute's language) for the SEC to say no adequate surveillance-sharing agreement can exist for a Bitcoin spot ETF when Bitcoin futures ETFs can be exempted from the same 19b-4 approval process on the presumption that derivatives based securities have adequate surveillance programs.
 
At minimum, the SEC’s failure to grapple with that inconsistency could be an APA violation. (12/21/21)
 
13. A Grayscale Lawsuit Might Not Come Until July
Contributing Analysts Elliott Z Stein (Litigation)

Grayscale can't sue the SEC until the agency denies the application for a Bitcoin spot ETF and the rejection order is filed in the federal register, which might not happen until July. NYSE Arca likely also has standing to sue as the exchange that filed the relevant application. The SEC generally has 45 days to approve or reject such applications but can extend that process up to 240 days. Publication in the register generally happens within days of the SEC order. Once a lawsuit is filed, it could take more than a year to resolve.
 
Other sponsors of rejected Bitcoin spot ETFs -- namely VanEck and WisdomTree -- already have standing to sue, but we haven't seen any indication that they will. (12/21/21)
 

 
14. Venue Options for Grayscale Not Ideal
Contributing Analysts Elliott Z Stein (Litigation)
 
If Grayscale were to sue, its options for court venues would be limited and suboptimal. The Exchange Act (15 U.S. Code 78y) permits such lawsuits to be filed in federal appeals court in either Washington, D.C., or the petitioner's principal place of business, which for Grayscale is New York. Each court has a majority of judges appointed by Democratic presidents. Those judges are generally more deferential to agency action than their Republican-appointed colleagues, though that's a broad generalisation that doesn't always hold.
 
More favourable venues for Grayscale or another petitioner would be the Fifth Circuit federal appeals court (covering Louisiana, Mississippi and Texas) or the Eighth Circuit (covering Arkansas, the Dakotas, Iowa, Minnesota, Missouri and Nebraska). (12/21/21)
 

 
 
15. Potential Downside Risks of a Lawsuit
Contributing Analysts Elliott Z Stein (Litigation)
 
Suing the SEC isn't without risks. First, there's the possibility of antagonising your regulator. A second potential downside is that, in response to a court finding an APA violation, the SEC doesn't approve a Bitcoin spot ETF and instead mandates that Bitcoin futures ETFs also go through the 19b-4 approval process as the spot funds must. That outcome would treat Bitcoin spot and futures ETFs similarly, but not in the way proponents of the former envision. We think that outcome is unlikely since it could effectively unwind the glide path to Bitcoin futures ETF approval that the SEC has already blessed, yet it can't be completely ruled out. (12/21/21)
 

legendary
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According to the SEC report, the investment firm Kingfisher Capital acquired 93,463 shares of Bitcoin trust (GBTC) from Grayscale Investments during Q4 2021. Thus, as of December 31, Kingfisher Capital had 114,350 GBTC, which were valued at $3.9 million. https://www.sec.gov/edgar/search/#/q=bitcoin&dateRange=custom&entityName=Kingfisher&startdt=2022-01-25&enddt=2022-01-25
adding an extra detail:
114350 shares is equivalent to 106btc
legendary
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According to the SEC report, the investment firm Kingfisher Capital acquired 93,463 shares of Bitcoin trust (GBTC) from Grayscale Investments during Q4 2021. Thus, as of December 31, Kingfisher Capital had 114,350 GBTC, which were valued at $3.9 million. https://www.sec.gov/edgar/search/#/q=bitcoin&dateRange=custom&entityName=Kingfisher&startdt=2022-01-25&enddt=2022-01-25


legendary
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meaning if exchange A has coins at 2% less than exchange B. someone can buy on A and sell on B in seconds and not have arbitrage risk

An arbitrage would be:
Borrow some coins
Sell coins on B
Move liquidity From B to A
Use liquidity on A to Buy back coins
Give back the coins and keep the change.

no, thats called "shorting"
borrowing(short)
short: borrow asset to sell then buy cheaper to repay the loaned asset and keep the extra

or the opposite
long: buy low to sell higher and keep the profits of the sell

the arbitrage is the movement between the exchanges which can be used both in cases of your own funds (long) or borrowed(short)

yes you can also short by selling the asset in one exchange. and hold there wait for a dip and buy back in, in the same exchange to offer back the initial asset amount to then keep the difference.

but arbitrage is the use of 2 exchanges to take advantage of the difference in market price between the 2. whether its long or short
legendary
Activity: 4466
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Arbitrage involves:
No risk
No capital

I think that your idea of arbitrage is idealistic. In reality, arbitrage always involves some risk and capital.

In your example, capital is required to borrow the coins.

In your example, there is risk in two steps - "Move liquidity From B to A" and "Use liquidity on A to Buy back coins". The risk is that in the time that those steps take to execute the price could change.
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