Claims that DCG Grayscale's $btc / $eth trust are ponzis and/or on the verge of collapse is FUD from #crypto twitter void of facts and rational thought.
🧵 I outline why grayscale's $gbtc is positioned for a 100% annualized return in the next 12 months:
Data below.
🧵 I outline why grayscale's $gbtc is positioned for a 100% annualized return in the next 12 months:
Data below.
/1 #grayscale funds are safe
#Coinbase Custody Trust is the custodian of Grayscale’s bitcoin, who reaffirmed that #DCG's Grayscale’s bitcoin assets are secured and not used as collateral in a manner similar to FTX:
#Coinbase Custody Trust is the custodian of Grayscale’s bitcoin, who reaffirmed that #DCG's Grayscale’s bitcoin assets are secured and not used as collateral in a manner similar to FTX:
/2 Why?
US-domiciled public crypto exchanges under US regulatory supervision are solvent. All exchange catastrophes we’ve witnessed have been a byproduct of unregulated off-shore crypto firms domiciled in The Bahamas, Antigua, Hong-Kong or some other far-away land ....
US-domiciled public crypto exchanges under US regulatory supervision are solvent. All exchange catastrophes we’ve witnessed have been a byproduct of unregulated off-shore crypto firms domiciled in The Bahamas, Antigua, Hong-Kong or some other far-away land ....
/3
...with a loose regulatory framework and/or governing body that can be sold to the highest bidder.
For example, the #FTX regulatory probe commissioned by the US DOJ, SEC, and CFTC is centered around FTX Trading Ltd, a legal entity domiciled in Hong Kong & The Bahamas.
...with a loose regulatory framework and/or governing body that can be sold to the highest bidder.
For example, the #FTX regulatory probe commissioned by the US DOJ, SEC, and CFTC is centered around FTX Trading Ltd, a legal entity domiciled in Hong Kong & The Bahamas.
/4
The loss of depositor funds, claims of comingling with #Alameda Research, SBF’s use of FTX as his personal piggy bank; it’s all related to assets custodied by entities outside of the United States.
The loss of depositor funds, claims of comingling with #Alameda Research, SBF’s use of FTX as his personal piggy bank; it’s all related to assets custodied by entities outside of the United States.
/5
The legal entity of FTX.US (dba as LedgerX) is not included in the regulatory probe related to the theft of depositor funds.
The legal entity of FTX.US (dba as LedgerX) is not included in the regulatory probe related to the theft of depositor funds.
/6 Upside on GBTC and #bitcoin
As of 12/28 $ GBTC is trading at a discount of 48% to its underlying asset.
Said another way, $1 of bitcoin can be acquired for 52 cents.
As of 12/28 $ GBTC is trading at a discount of 48% to its underlying asset.
Said another way, $1 of bitcoin can be acquired for 52 cents.
/7 How?
The only path to profitability for institutional investors as well as any holder of GBTC is if the trust is able to redeem GBTC shares for its underlying asset bitcoin, which would return bitcoin to its shareholders at the NAV price pro-rata the amount of GBTC shares .
The only path to profitability for institutional investors as well as any holder of GBTC is if the trust is able to redeem GBTC shares for its underlying asset bitcoin, which would return bitcoin to its shareholders at the NAV price pro-rata the amount of GBTC shares .
/8 THE PATH TO REDEMPTION IS THE OPPORTUNITY
There are 3 paths through which Grayscale could redeem GBTC shares for the underlying $btc
1. Shareholders could vote to dissolve the GBTC trust
2. Grayscale could dissolve the trust
3. SEC grants Grayscale conversion to ETF
There are 3 paths through which Grayscale could redeem GBTC shares for the underlying $btc
1. Shareholders could vote to dissolve the GBTC trust
2. Grayscale could dissolve the trust
3. SEC grants Grayscale conversion to ETF
/9 Option 1 = 0%
GBTC ownership is not centralized. Excluding DCG, which owns ~9.53% of the trust (and is excluded from shareholder voting rights), the remaining 13 shareholders represent only 1.45% of shareholder interests…
GBTC ownership is not centralized. Excluding DCG, which owns ~9.53% of the trust (and is excluded from shareholder voting rights), the remaining 13 shareholders represent only 1.45% of shareholder interests…
/10 Option 2 = 0%
Grayscale reserves the right, at any time, for any reason, to dissolve the trust, at its sole discretion. Given that still accounts for ~25%-35% of DCG’s pretax revenue.
Grayscale reserves the right, at any time, for any reason, to dissolve the trust, at its sole discretion. Given that still accounts for ~25%-35% of DCG’s pretax revenue.
/11
Why would DCG elect to dissolve a trust which accounts for 30% of its revenue? They wouldn’t. Said another way, there is no chance in hell that Grayscale voluntarily dissolves the trust.
Why would DCG elect to dissolve a trust which accounts for 30% of its revenue? They wouldn’t. Said another way, there is no chance in hell that Grayscale voluntarily dissolves the trust.
/12 Option 3 = 50%
Grayscale’s goal since inception is the conversion of GBTC into an ETF.
src1- grayscale.com/pending-gbtc-d…
src2 - grayscale.com/end-of-year-ce…
Grayscale’s goal since inception is the conversion of GBTC into an ETF.
src1- grayscale.com/pending-gbtc-d…
src2 - grayscale.com/end-of-year-ce…
/13
ETF conversion matters because of regulatory language related to “Regulation M”, a step in the ETF application process that allows Grayscale to simultaneously create and redeem shares at the NAV.
ETF conversion matters because of regulatory language related to “Regulation M”, a step in the ETF application process that allows Grayscale to simultaneously create and redeem shares at the NAV.
/14
Regulation M is the relief that would make GBTC shareholders whole by bringing the GBTC share price to upside parity with bitcoin, but 14 others have tried and failed.
Regulation M is the relief that would make GBTC shareholders whole by bringing the GBTC share price to upside parity with bitcoin, but 14 others have tried and failed.
/15
Grayscale’s spot #bitcoin #ETF was denied by the SEC on June 2022. This triggered Grayscale to initiate a lawsuit against the SEC, demanding relief from the SEC’s “disparate, arbitrary and discriminatory treatment of spot ETF applications":
src - grayscale.com/gbtc-litigatio…
Grayscale’s spot #bitcoin #ETF was denied by the SEC on June 2022. This triggered Grayscale to initiate a lawsuit against the SEC, demanding relief from the SEC’s “disparate, arbitrary and discriminatory treatment of spot ETF applications":
src - grayscale.com/gbtc-litigatio…
/16
SEC’s reply brief defends its decision on the basis that bitcoin spot ETFs are not subject to the same regulatory surveillance that exists with bitcoin futures contracts, thereby justifying the disallowment of the bitcoin spot ETF application:
src. -grayscale.com/wp-content/upl…
SEC’s reply brief defends its decision on the basis that bitcoin spot ETFs are not subject to the same regulatory surveillance that exists with bitcoin futures contracts, thereby justifying the disallowment of the bitcoin spot ETF application:
src. -grayscale.com/wp-content/upl…
/17
With the fallout of FTX and the broader collapse of the crypto ecosystem in 2022 there may be a renewed mandate for regulators to enact legislative policies that “help protect retail investors” in 2023. The outcome of this lawsuit could be one such policy.
With the fallout of FTX and the broader collapse of the crypto ecosystem in 2022 there may be a renewed mandate for regulators to enact legislative policies that “help protect retail investors” in 2023. The outcome of this lawsuit could be one such policy.
/18
If we assume the disposition of the Grayscale vs. SEC lawsuit is the approval for bitcoin ETF conversion, this means Grayscale will be able to create and redeem shares at the NAV, bringing the spread between the NAV and market cap to zero.
If we assume the disposition of the Grayscale vs. SEC lawsuit is the approval for bitcoin ETF conversion, this means Grayscale will be able to create and redeem shares at the NAV, bringing the spread between the NAV and market cap to zero.
/19
If we buy GBTC at the current market rate of $7.80, our annualized financing and opportunity costs are defined below:
-A principal deposit of $100,000 with a 1.25x leveraged position
- Gives us exposure to ~16,025 GBTC shares at $7.80
If we buy GBTC at the current market rate of $7.80, our annualized financing and opportunity costs are defined below:
-A principal deposit of $100,000 with a 1.25x leveraged position
- Gives us exposure to ~16,025 GBTC shares at $7.80
/20
…and If the bitcoin spot ETF application is approved:
-The underlying GBTC asset would be redeemed at its NAV of ~$15.15
-After accounting for financing costs, our trade would yield a pre-tax profit of 100%
…and If the bitcoin spot ETF application is approved:
-The underlying GBTC asset would be redeemed at its NAV of ~$15.15
-After accounting for financing costs, our trade would yield a pre-tax profit of 100%
/21 Did we bottom?
I do believe we are approaching a bitcoin bottom, which we can quantify by analyzing extended periods of forced selling, capitulation & realized losses.
I do believe we are approaching a bitcoin bottom, which we can quantify by analyzing extended periods of forced selling, capitulation & realized losses.
/22
BUT If Grayscale can’t convert to an ETF in 2023, it is doubtful that we’d have such an outcome in 2024, especially against the backdrop of a divided US congress, which has proven to be ineffective at passing bipartisan legislation.
src - niskanencenter.org/unified-or-div…
BUT If Grayscale can’t convert to an ETF in 2023, it is doubtful that we’d have such an outcome in 2024, especially against the backdrop of a divided US congress, which has proven to be ineffective at passing bipartisan legislation.
src - niskanencenter.org/unified-or-div…
/23 In conclusion:
-Grayscale’s custodian Coinbase has custody of the $btc & $eth assets
-The trust is not co-mingling its funds with other DCG entities
-There will be a 2023 disposition of the spot ETF application
GBTC will trade sideways until said disposition takes place
-Grayscale’s custodian Coinbase has custody of the $btc & $eth assets
-The trust is not co-mingling its funds with other DCG entities
-There will be a 2023 disposition of the spot ETF application
GBTC will trade sideways until said disposition takes place
/24
For every $1 of GBTC bought, we are presented with a pre-tax upside of $1.04. I am bullish & the outcome is binary:
-BTC spot ETF application approved = profit
-BTC spot ETF application denied = loss
DYOR: I am long $GBTC.
For every $1 of GBTC bought, we are presented with a pre-tax upside of $1.04. I am bullish & the outcome is binary:
-BTC spot ETF application approved = profit
-BTC spot ETF application denied = loss
DYOR: I am long $GBTC.
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