Valkyrie Reveals Intention to Sponsor Grayscale’s Bitcoin Trust as GBTC Discount to NAV Widens
Valkyrie Investments, a Tennessee-based asset manager, has announced its intention to become the new sponsor of Grayscale’s Bitcoin Trust (GBTC). The company states that it is “uniquely qualified” for the role and plans to facilitate redemptions at net asset value (NAV) through a Regulation M filing.
Valkyrie Offers to Take Over Management of Grayscale’s Bitcoin Trust
Grayscale’s Bitcoin Trust (GBTC) has faced challenges in 2022, with the fund’s discount to net asset value (NAV) reaching record levels. Over the past six months, the spread between the fund’s value and NAV has increased by more than 35% by the end of Sept. 2022. As of Dec. 30, 2022, the discount has further widened to more than 45%. This means that the value of the bitcoin fund is currently lower than current BTC spot prices. Valkyrie wants to remedy the situation by taking over sponsorship and creating another fund.
“We understand that Grayscale has played an important role in the development and growth of the bitcoin ecosystem with the launch of GBTC, and we respect the team and the work that they have done,” Valkyrie wrote. “However, in light of recent events involving Grayscale and its family of affiliated companies, it is time for a change. Valkyrie is the best company to manage GBTC to ensure its investors are treated fairly.”
The fund manager said Friday it is launching the Valkyrie Opportunistic Fund, a venture that aims to take advantage of GBTC’s discount to net asset value. According to Valkyrie, the team will add to its GBTC holdings, which could eventually show the “true value of the underlying bitcoin for our investors.” At the time of writing, the Bitcoin Trust managed by Grayscale holds approximately 643,572 BTC.
Following the announcement, Eric Balchunas, senior exchange-traded fund (ETF) analyst for Bloomberg, shared his opinion about Valkyrie’s intentions. “Valkyrie is launching the Valkyrie Opportunistic Fund in an effort to become the new sponsor of GBTC (which is trading at a 50% discount) and facilitate redemptions at NAV and for a fee of 75bps,” Balchunas tweeted. “Long shot but speaks to growing pressure.”
In the announcement, Valkyrie offered three proposals:
- Facilitate orderly redemptions at net asset value (NAV) for all investors who want it through a timely Regulation M filing. This will ensure that all investors have the option to redeem their shares at a fair price, without any delays or obstacles.
- Lower the fees to a more equitable level, in line with best industry practices. We propose a fee of 75 basis points, which is significantly lower than the current rate of 200 basis points.
- Attempt to offer redemptions in both bitcoin and cash for investors. This will give investors greater flexibility and choice when it comes to redeeming their shares.
Valkyrie’s offer comes at a time when Grayscale’s parent firm Digital Currency Group (DCG) has been having issues with its subsidiary Genesis Global Capital. In mid-November, Genesis’ lending arm suspended withdrawals and new loan originations on the platform. It is reported that Genesis owes the cryptocurrency exchange Gemini $900 million, and Gemini has formed a committee, with financial advisor Houlihan Lokey, to recover the funds.
In addition, Gemini faces a potential class action lawsuit from two investors regarding the company’s Gemini Earn program. Despite the speculation, a DCG shareholder letter from CEO Barry Silbert stated that the company will “continue to be a leading builder of the industry.” At the time of writing, Grayscale or DCG has not responded to Valkyrie’s offer to become the new GBTC sponsor.
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