According to a new publication On Twitter by Ryan Selkis, CEO of blockchain research firm Messari, the majority shareholders of Grayscale Bitcoin Trust (GBTC), Genesis Global, and Digital Currency Group cannot simply sell off their holdings to raise more capital. Selkis explained that the restrictions are due to Rule 144A of the United States Securities Act of 1933, which requires issuers of entities listed over the counter, or OTC, to provide advance notice of proposed sales, as well as a quarterly sales limit of 1% of outstanding shares or weekly traded volume.
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
DCG bought almost 800mm of GBTC shares since the premium became a discount in early 2021.
DCG’s board authorized the purchase of up to $1.2 billion in shares of Grayscale Trusts.
In light of the current liquidity problems, the rest are likely to be put on hold indefinitely.
Based on calculations provided by Selkis, this works out to a maximum of $62 million in settlements per quarter based on the shares outstanding test and $23 million in settlements per quarter based on the trading volume test. “It is *much* more likely that DCG-Genesis will refinance using GBTC as collateral,” he wrote.
Grayscale Bitcoin Trust, the world’s largest Bitcoin investment fund, is currently trading at a discount to NAV due to liquidity issues surrounding its operator Genesis Global and insolvency rumors surrounding it. to its owner Digital Currency Group. Digital Currency Group is said to have bought nearly $800 million worth of GBTC shares since it began trading at a discount to NAV. The company and its affiliates now own approximately 10% of the fund’s outstanding shares.
After Genesis Global began halting withdrawals on November 16, rumors began to circulate that its parent company, Digital Currency Group, was also in a state of insolvency and would have to liquidate GBTC to pay its creditors. Since then, Grayscale has cleared up that “the laws, regulations, and documents defining Grayscale’s digital asset products prohibit the digital assets underlying the products from being lent, borrowed, or otherwise encumbered” and that “the BTC underlying the Grayscale Bitcoin Trust are owned by GBTC and GBTC only”.
Grayscale also posted a letter signed by Coinbase CFO Alesia Haas and Coinbase Custody CEO Aaron Schnarch showing that it currently has 635,235 bitcoins (BTC) in custody in Grayscale’s name.
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