Topic: Everything you wanted to know about Grayscale BTC Trust but were afraid to ask! - page 5. (Read 16372 times)

Ok... that makes a wee bit more sense, once we remove your various interweaved denigrating remarks. 

I guess you cannot help yourself to throw in a few zingers along the way...
 


Well, maybe you are right that tax ramifications will not be as BIG of a deal as many folks (including yours truly and fillippone, apparently) are considering to be factors.  Good thing we have you holding our hands and setting us straight, even though you seem ongoingly reluctant in our relationship (apparently we are dependent upon you, while you continue to kick and scream about it.. I am almost ashamed to say, thanks daddy frank.). 

you keep refering to the taxability of things. which shows your not on the same page

grayscale IS THE PRIMARY MARKET(wholesale)

lets compare again
blackrock is primary market(wholesale) for JPmorgan to join as AP.. where by JPmorgan then sell its basket of shares to secondary market(retail) end users

secondly
the need for grayscale to build up more baskets via AP (grayscale already have 600k+ coin seed sponsored)
vs
the need for blackrock to build up more baskets via AP (blackrock only have 227 coin seed sponsored)

shows grayscale dont need it.. blackrock does.. so thats why blackrock are doing a 0.2% for first $5bill to entice AP to join them

..
grayscales model is different to other ETF

Now I get it.
Anyway, not so sure I can agree on the subsance of your reasoning.
It’s true that today GBTC has no primary market, hence no need for AP, but things will change upon ETF conversion. Goldman has been mentioned as an AP member for Grayscale, for example.
So a lot of your points would cease to be valid.

i was referring to something else

seems you too conflate or not able to understand the differences of relationship of ETF vs AP vs end user customers

anyway
tax is only incurred when shares/assets are converted to fiat (either AP dissolving shares to cash out basket, but then not re-buying within reasonable time. or end users selling shares for fiat)

grayscale are not needing to dissolve or creating baskets.. so please forget "grayscale incur tax"
they also have their many baskets and so dont need AP(agents) dissolving/creating baskets

in short
grayscale are not interested in enticing new baskets when they launch so they dont need to do 0% for first X bill deals, or lowball offers
yes grayscale can change their fee's at a moments notice even after ETF acceptance/launch

---

from an end user standpoint
blackrock charge upto 0.3% to jpmorgan for JPmorgan to be a AP(agent/broker), JPmorgan than attach their own fee's ontop, meaning an end user investor might be charged 1.8%-3% per trade. sometimes fixed cost per trade

however grayscale is a different model for end user investments, which is why grayscale can have higher fee's and still be competitive



i did originally make a long detailed post explaining the encyclopedia of investment infrastructure...and the different levels of middlemen in play and lots of % of fee's per level, and who incurs tax and when...  but maybe if you really want detailed answers just DYOR and research on google. you will get the answers faster, compared to writing forum posts and waiting hours for someone to spoonfeed you

I have my doubts about whether I am as confused as your presentation seems to be equally confused or confusing.

You seem to be talking about the 1.5% as if it were a one time charge, and it seems to be an annual management fee... So if someone just chooses to stay in the Grayscale ETF (after conversion), they will be incurring a 1.5% fee every year, and yeah, they are likely not going to get any new clients/customers entering the fund if they are going to have to pay1.5% as opposed to going with another ETF that has lower fees.  Now if the client is already existing in GBTC and they choose to cash out and move to a lower fund, then they would have a taxable event.

The 1.5% paying themselves comment is also confusing because my understanding is that grayscale used to shave off 2% per year and then after the conversion they will only shave off 1.5% per year... so they are paying themselves with client money, and yeah Grayscale does own some of its own shares, perhaps, but I wasn't even talking about any of that or even wanting to get in the weeds of any of it.

My main point was just to clarify a couple small things from the interview and then just give an overview for what Seyffart and Balchunas might have had been saying in the interview and I highlighted a few points that they made.  I was not even trying to get into the weeds of the matter.


I doubt that I am even wanting to get into that level of analysis with my comments, so you seem to be reading into whatever I was asserting or summarizing from what I heard within the podcast..


Sounds like you are going way into the weeds about potential tax ramifications, and I doubt that you are even really clearing things up in any kind of meaningful way that I consider very much related to what I had already stated.  I already mentioned that person who bought GBTC shares and then gets converted into the Grayscale ETF does not seem to experience a taxable event, but if they sell their GBTC shares prior to the conversion or maybe the refuse to go through the conversion, then they would likely have a taxable event.  They would also likely have a taxable event if they sold their Grayscale ETF shares after the conversion.  So are you saying anything different than that, and does it even matter to whatever we were talking about?  If Grayscale offers one product with 1.5% fees and then they offer another product with 0.30% fees, then they are likely going to attract new clients into the product with the lower fees, and little by little the one with the higher fees would shrink in size but until the clients leave, they would be able to charge them the 1.5% higher fees, and maybe Grayscale would choose to reduce those 1.5% fees down to more reasonable rates with the passage of time? Perhaps?  but maybe they won't and the clients will just stay in that product until they are ready to incur the taxable event of selling whatever shares they have.. or maybe if they can roll their grayscale ETF shares over into another product of a similar type and not incur a taxable event, then they might choose to do that at some date in the future when (or if) that becomes a possibility.  I am not claiming to be any kind of tax expert (or even to know much of anything about the matter beyond basic observations and maybe my attempts at parroting (inaccurately from your interpretation) from what I hear from other supposed experts)..

Sorry, could you clarify this above?
I am afraid I totally lost you.
As far as I understand, Grayscale has such outrageous fees as they already have 27 billion in AUM, and for sure, none of them want to incur a taxable event just to avoid 100 bps of yearly fees. In a way, they are trapped inside GBTC.
But maybe you were referring to something else I didn't understand.

their are special exceptions for fund managers. they are not charged cap gains per share sell/buy or conversions.. otherwise they would not be able to day-trade small 0.x% profits if they are charged 20-40% per trade/exchange

there are other exceptions that allow offsetting gains if they same day then buy assets
the capgains is only really triggered if you sell and stay sold.. thats when cap gains is "realised"

grayscale has 600k+ coins. they dont need more baskets entering via AP's
i think you are still confusing the AP(agents of baskets) vs the end user customers selling/buying individual shares

Seyffart and Balchunas are well researched, but i feel you still need to understand what they are saying.
for instance they say that ETF waiver fee's for first X billion where as grayscale have 1.5% from start. and they also say the fee's can change even as early as the next day..
grayscale dont want more AP's handing in baskets. grayscale already has 600k+btc.. and because they own those 600k+ they are not actually paying 1.5% because they are paying themselves, so it cancels out. its more of a deterrent to get share holders to buy up enough shares to create baskets to vote out and dissolve shares. the 1.5% is more of a "hold" signal to prevent trades, basket forming to exit


individual share holders are different group to the AP managing baskets of shares.
please learn the difference
you confuse "clients" as both AP managing baskets AND "clients" end share individual share customer

maybe try to use "agents" for the AP managing baskets that are affected by the "in-cash" stipulation instead of "in-kind" dissolving of shares to unlock btc.. incash= forcing those unlocked btc to be darkmarket(otc) sold by coinbase into cash to give cash to AP

clients are the end user individual share customers, whom cant individually dissolve shares/unlock btc.. and are just buying/selling shares at the front end share platform
..
CLIENTS are taxable on front end share platform. because that is standard share purchase/selling for fiat. always has been*
agents/grayscale are not taxable per client trade on front end share platform
..
agents/grayscale are taxable when dissolving share baskets due to in-kind rule
clients are not involved in the basket thing

the 'in-kind' SEC rule is about the basket handling between sponsors/AP (agents)

*there are ways to offset gain/losses if shares are sold and new shares bought same-day, in an umbrella fund like a pension portfolio manager
(there are many exceptions to the cap gains rule when shifting between cash-shares)

When I made my earlier assertion that I thought that Grayscale's conversion from a Trust to a spot BTC ETF was going to be a taxable event based on the in-cash process rather than an in-kind process, I was likely overly relying upon the talking heads on the Laura Shin podcast (which is James Seyffart and Eric Balchunas), and I have heard these guys discuss the BTC ETF on a variety of occasions, including on other podcasts.  Essentially, they seem to now have changed their opinions, to suggest that Grayscale conversion of it's clients (even though "in-cash") would not be a taxable event since no bitcoin would be sold, it is merely changing the wrapper as they had said around minute 45 in this linked podcast, released today.

This particular podcast is a bit more than an hour and surely I might be mixing up what Seyffart says versus what Balchunas says, and does it really matter too much, if they seems to have some level of expertise and experience that backs up their points fairly well, and during the podcast, they go into a fairly detailed discussion and are currently arguing a belief that the ETFs are likely to be approved by Wednesday, and allowed to trade by Thursday.. and so the alternative theory would be that they would be allowed to trade on Wednesday.. and yeah of course, they are talking from their own expertise - and I consider this to be part of my own research, even if Franky would conclude that the level of research is not sufficient for him, and that's his choice regarding how he wants to spend his time.

When it comes to Grayscale specifically, these guys seem to be suggesting that Grayscale is keeping their fees so high (at 1.5%) because they are likely going to try to milk their current clients - who might not want to suffer a taxable event by converting, and they will end up offering a similar product that will have low fees like the other ETF providers are currently offering.  Still to be seen some of these speculative matters.

I could give less than two ratts' asses which one is better or which one to pick.  I am not making any recommendation that anyone use those products, but there are going to be people who are choosing ETFs based on what is available to them, and sure maybe they will have access to choose whichever one that they want, and maybe their will be limitations on which ones are available to them.

As far as the government is concerned, it seems that their job is to allow most if not all of the ETFs, and to let the market decide which is better.. so long as they ETFs meet the basic requirements, they should be approved, which maybe all 12, 13 14 or whatever will end up getting approved, then it is up to each of them to attract clients/customers.


Yes, maybe customers will end up choosing them.  I give few shits.

And, likely the government is supposed to be creating the appearance that they give few shits either, so long as people are able to freely choose which one(s) they want to put their money into.


This part of your answer seems repetitive.


I agree.. some kind of an approval seems imminent.


That does not seem likely, but if it were to happen like that, it seems that from your hypothetical Ark21 was not ready by its own doing.


I don't see what is so challenging about your hypothetical, unless you are saying that the SEC is creating the condition in which others are allowed to start first. 

I think that we are getting too much in the weeds, and neither of us is really adding any new value/information at this point.

im not touting blackrock out of favouritism. nor do i think the SEC would..

put it this way. imagine any other legal setting
lets use court cases of DUI's as a for instance
there is a defence attorney that has been defending DUI suspects for decades. and has won 99%

then there is a naive defence attorney, never defended before, but has some guys with some experience advising him..

you just read their court history of case results(or lack there of)

which defence attorney would you pick?

its just basic common sense if blackrocks legal team have been filing ETF applications for decades, they know what to expect and have answers ready, rebuttals prepped and such

its not favouritism of "aww this young attorney looks young and cute, ill have him, over the old guy"
its more so of looking at the logical common sense of accepting the one with most experience, without favouritism

that said. only ARK21 has an actual final deadline in january so technically only ARK21 is the only one deserving of an announcement either way legally
which as we seen by grayscales final deadline last year. wasnt a defacto approval just because of final deadline status.

so there is chance none get approved in january from a legal prospective of previous precedence..

however the odds are more interesting this time compared to the grayscale decision saga last year. because the SEC is now actually talking and organising and actually shows movement

..
here is another pebble in the water, for you to splash about with thoughts over

what if ark21 gets approval on jan10th but is stated it cant start offering shares for XX days
nothing else about the rest is said on jan 11th,12th,13th,14th.. then on the 15th SEC announces 4 others are approved and can start offering shares in XX minus 5 days.. meaning they all start offering shares on the same day of a later date..

..
let me take the thought one pebble further
what if XX days was 90days meaning april 10th.. meaning long after some others FINAL deadline in march
whereby in march the others get approved and able to begin with just a <28 day delay. again meaning all start on april 10th

I never said that anyone can swap their shares (whether ETF or otherwise) for sats, but I was referring to a taxable event that happens if you go from BTC to cash versus if you went from BTC to BTC.


I did not notice, but I would imagine if they are one of the largest (if not the largest) asset manager in the world, then they must be doing something to make money (including having a variety of experiences and likely tentacles in a lot of places)


I doubt that I said that, but even if you are trying to act as if you are neutral, by your touting of Blackrock as so much better blah blah blah, you seem to be implying that it is acceptable for SEC to pick winners and losers and to give favorable treatment to Blackrock (even if you are not directly saying it)....


Sure, it could happen, even though we seem to have so much ramping up of expectations that the approval of various ETFs is imminent.

Don't get me wrong, I am not trading on what seems to be the sentiment of a lot of folks, besides uie-pooie, who watches the space in detail.

And, yeah, I know that people get hyped up, but it is seeming to be a pretty BIG deal - especially the way that there seems to be so much ongoing interactions with various ETF applicants (and various kinds of ongoing public filings of further preparations and millions being put into advertisements for ETF products) that seem to be pushing things along in terms of closer and closer likelihood of approvals, including good chances of earlier next week.. and yeah, it is not a done deal, but still.. seeming like pretty good odds of sooner rather than later approval.


Well, I agree with you on this point.  It is not approved until it is approved. 

Also, they want to avoid the GBTC risk of no go on the first date. They made good money with GBTC shares, and there is no point of simultaneously finance a competitor, and risk a discount widening in case of SEC denial.
I wouldn't read too much into this move, frankly.

cathie woods also had SEC communication whereby if she believes her ETF is not able to operate in january there is no point submitting more filings at the end of december. so by her submitting the forms in late december needed to finalise the conditions she is pretty much stating she is ready to roll

so yes grabbing cash out of other investments to then seed her own is good business

Well, this would explain why Cathie Wood was selling recently. She could have even more insider info than Balchunas.

first of all after the approval and even now pre approval, people cant buy one grayscale share and then convert it to 0.00089445 real btc
"grayscale customers" never have nor will get that ability. before or after approval

the whole SEC regulation about "in-cash" is about BASKETS(allotments) of shares being managed by agents(fund managers(authorised participants)) dissolving a basket of shares and get the reciprocal coins unlocked where the custodian then sales on OTC/darkpool by which the agents then get cash from custodian

again an ETF is never going to be where "customers" get to swap shares for sats

.. secondly
im not a fan of blackrock. however i recognise their playbook
if you see how blackrock is doing BIG deals in land grabs of eastern ukraine. you will notice they are big players in investments and deals. they have history. and that cant be ignored

though grayscale has been a bitcoin associated brand for nearly a decade and blackrock are only toddlers in the crypto market. blackrocks financial experience of ETF approvals is not something to ignore. and grayscales crypto involvement is not something to inflate as superior in regards to SEC decisions

thirdly
im not the one creating deadlines
for instance
ARK21 FINAL deadline is jan 10th

but the others just have interim deadlines
and like i said hashdex and franklin both had interim deadlines of JANUARY FIRST.. but they didnt get approved
so with bitwise(jan 14th) blackrock(jan 15th) INTERIM(NOT FINAL) there is a chance SEC may deny ARK21 on the 10th and then delay the rest until their final deadlines of march-june

that said.. i said chance..
with SEC not just communicating with CBOE for arks approval but also nasdaq and nyse for the others. there is chance of SOME approvals at ark21's deadline.. but its not set in stone, proven, guaranteed

In regards to Grayscale, I personally believe that SEC is already punishing them quite severely by insisting upon "cash" rather than "in kind" conversion... and so in that regard, even if GBTC  goes forward (with the approval) at the same time as the others, whether it is 4-6 as proclaimed by you, Franky, or some higher number that is closer to the full number (maybe 9-12?), I am inclined to believe that Grayscale is going to largely be approved at the same time and that the number of approved will be way closer to the full number rather than Franky's lower number, which even you (Franky) seem to be coming up a bit off of your initial assertions that only 1 would be approved.. and even your date seems to becoming more accepting that these approvals are imminent.. even though it did turn out, as you suggested, that they had not gotten approved in 2023 - but still matters are humming right along, and in late November when I suggested that the could have had been approved in 2023, I actually had not realized that there were public comment periods that were until early January.

Another point regarding how soon that these matters are going to go "live" after approval, there are some folks that suggest that they may well end up going live within a few days after approval (so allowed to be traded), and part of the rationale for that might have to do with the complexity of fair advantage or if Grayscale is able to convert right away, then the ETFs should be allowed to provide competition (or an alternative place that current Grayscale customers would be able to go upon their conversion, including that the "in cash" rather than "in kind" conversion is creating a taxable event that may well more easily inspire current Grayscale customers to be more portable.. which again shows another way that Grayscale is being punished or attacked and probably Blackrock or some of the insider bullies were able to get a likely approval of those kinds of dynamics in which some of the status quo incumbents, such as Blackrock, are likely using the tools of government to create seemingly subtle, yet unfair advantages for themselves... even though you, franky, seem to just love Blackrock for its supposed competency, rather than its getting things done due to bullying and "influence".. which surely might not always be distinguishable between free market dynamics and currying favor.

officially only ARK21 has the jan 10th FINAL deadline, the others have FINAL deadlines for March onwards
where by some only have "next"(interim deadlines) in january 14th-17th
with hashdex having a "next" interim deadline on the 1st of january and they did NOT get any news at all.. (shows some possibility that the others with just interim deadlines in january may get ignored too)

however the SEC has been not only consulting with the CBOE (finalising ark) but also with NYSE, NASDAQ to suggest finalising some others too

i still dont think all dozen will get approved simultaneously,
but the main 4-6ish will sometime before summer, maybe at same time in january or in march

grayscale. due to all litigation of the past and present (gemini fiasco) doesnt give good confidence to the SEC, although grayscales recent change of management to people with real fund management experience would/did help..
so grayscale is still the questionable one compared to say blackrock

ETF approval is nigh, the real question is: "Will GBTC be in the same batch as the other issuers"?
Yesterday there was an X-space with the two BBG gurus Balchunas and Seyffart and the hypothesis that GBTC would be excluded from the day 1 launch surfaced, they both more or less agreed on that.
This could have massive implications for GBTC, which actually saw the spread narrowing to less than 6%.

nah
its more like each ETF dont want to be left behind so are asking the SEC about what stipulations/requirements each one lacks in the confidence level of all being approved in jan 2024
and each are getting answered quite quickly. yep the SEC is finally communicating with ETF applicants and sharing the requirements each one lacks. which is where the ETF are then speedily updating their SEC filings to meet the latest requirements

EG the ETF that were doing "inkind" were being asked to offer "in cash" settlements of btc basket closing.
EG some who lack previous experience in funds management are asked to change the directorships with guys with experience, to gain regulatory confidence that competes with ETF applicants that had previous experience

the ETF are all in a rush to meet requirements in the hopes it will make the SEC release an announcement of more then just 1 approval at a time
but before december 2023 the SEC was no where near able/ready to approve any.. let alone more then 1 etf at a time as they all missed certain requirements

although "favouritism" is a witch-hunt word which people shout if SEC dont approve many at once.. but even from an outsiders point of view id have more confidence in blackrocks position in november 2023 compared to grayscale 2023 position
so i wouldnt call it favouritism if the SEC chose blackrock before grayscale. it call it smart thinking to choose one that has for decades been offering maany etf's, so know what they are doing. compared to grayscales previous directors thats never handled a ETF before

but grayscale now changing its directorships around, so gains some footing of confidence. so maybe grayscale has better hope of being approved alongside blackrock. though there are still some other considerations that show grayscale still lack certain things compared to blackrock
(EG the legal battles of funds loss/debt the DCG done in recent years)

Really there was no clear reason for the reshuffling of the board members and you can see some of the information from these two links. Grayscale Investments chair Barry Silbert resigns while SEC mulls Bitcoin ETF and Barry Silbert, Mark Murphy Resign In Grayscale Reshuffle reshuffling of workers in a company in some case help to grow the company in a good direction if the management is not working well to achieve the goal the reshuffling is good idea.