Valkyrie Investments?, a Tennessee-based asset manager, has declared its intention to be the new manager of Grayscale’s Bitcoin Trust (GBTC). The company believes it is “uniquely qualified” to fill the role and plans to facilitate redemptions at net asset values (NAV), as outlined in a Regulation M filing.
Valkyrie to Take Over Management of Grayscale’s Bitcoin Trust
The difficulties faced by Grayscale’s Bitcoin Trust (GBTC) in 2022 have been exacerbated by record-breaking levels of discount to net asset values (NAV). The spread between NAV and fund value has increased more than 35% in the past six months, and as of December 30, 2022, the discount had risen to over 45%. This means that the bitcoin pool is valued lower than current spot prices. Valkyrie hopes to address this issue by taking over management and creating a 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 they have done,” Valkyrie wrote. “However, in light of recent events it is time to make a shift for the company and its affiliated companies. Valkyrie is the best choice for GBTC management and to ensure that its investors are treated fairly.”
On Friday, the Valkyrie Opportunistic Fund was launched, a venture that seeks to capitalize on the NAV discount of GBTC. According to Valkyrie, the team will increase their GBTC holdings, which may eventually lead to the true value of the underlying bitcoin being accurately reflected to investors. As of the date of this writing, Grayscale’s Bitcoin Trust holds around 643,572 BTC.
Following the announcement, Eric Balchunas, Senior analyst at Bloomberg ETFs, 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 50% off) and facilitate trades at NAV and for a rate of 75bps,” Balchunas tweeted. “It’s a long shot, but it speaks to mounting pressure.”
In the announcement, Valkyrie offered three suggestions:
- Allow all investors to request redemptions from NAV by filing a timely return Regulation M. This will give them the right to redeem their shares at a fair value without any delays or obstructions.
- Lower the fees to a level that is in line with industry best practices. A rate of 75 basis point is proposed, which is substantially lower than the current rate of 200 basis points.
- Provide investors with cash and bitcoin rebates, giving them more options and flexibility when redeeming shares.
The offer comes at a time when Grayscale’s parent company Digital Currency Group (DCG) is facing issues with its subsidiary Genesis Global Capital. In mid-November, the lending arm Genesis had to suspend withdrawals or the creation of new loans on the platform. According to reports, the company owes the cryptocurrency exchange Gemini $900 million and a committee has been formed with financial advisors Houlihan Lokey to recover the funds.
In addition, two investors may bring a class-action lawsuit against the company in connection with its bankruptcy. Despite the speculation, in a shareholder correspondence from CEO Barry Silbert, it was stated that the company “will continue to be a leading industry builder.” As of this writing, Grayscale or DCG has not responded to Valkyrie’s offer to become the new GBTC sponsor.
What do you make of Valkyrie’s offer to manage GBTC? We would love to hear your thoughts on the topic.
