Good News For GBTC:
Blockchain expert Selkis claims, “It’s net excellent news for GBTC shareholders and FUD battling.”
Genesis Global and Digital Currency Group, the principal shareholders of Grayscale Bitcoin Trust (GBTC), can’t just sell their interests to earn more money, according to a tweet from Ryan Selkis, CEO of blockchain research company Messari. According to Selkis, Rule 144A of the U.S. Securities Act of 1933 sets a quarterly sales cap of either 1% of outstanding shares or weekly traded volume and mandates that issuers of OTC-traded firms provide advance notice of proposed sales.
2/ DCG bought nearly $800mm worth of GBTC shares since the premium flipped to a discount in early 2021.
DCG's board authorized up to $1.2bn of share purchases across Grayscale Trusts.
In light of the current liquidity issues, the remainder is likely on hold indefinitely.
— Ryan Selkis 🥷 (@twobitidiot) November 28, 2022
Use Of GBTC:
This results in a maximum of $23 million in liquidations per quarter based on the trading volume test and $62 million in liquidations per quarter based on the outstanding shares test, according to figures provided by Selkis. The use of GBTC as security for a DCG-Genesis refinancing is “far more likely,” he added.
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The largest Bitcoin investment trust in the world, Grayscale Bitcoin Trust, is currently trading at a 40% discount to net asset value (NAV) due to liquidity concerns with its operator Genesis Global and insolvency rumors with its owner, Digital Currency Group. Since GBTC shares started trading at a discount to NAV, it is rumored that Digital Currency Group has purchased over $800 million worth of GBTC shares. The company and its affiliates own approximately 10% of the trust’s outstanding shares.
After Genesis Global ceased permitting withdrawals on November 16, rumors spread that Digital Currency Group was also bankrupt and would have to sell GBTC. Grayscale has since stated that “rules, regulations, and documents that govern Grayscale’s digital asset products restrict the underlying digital assets from being leased, borrowed, or otherwise encumbered” and that “the $BTC underlying Grayscale Bitcoin Trust is owned by $GBTC and $GBTC alone.”
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A letter from Coinbase’s Alesia Haas and Aaron Schnarch, CEO of Coinbase Custody, confirms that 635,235 BTC are now held in custody for Grayscale, which was also made public by Grayscale.