In a letter published on Friday, Valkyrie announced its plans to become the new manager and sponsor of Grayscale’s Bitcoin Trust (GBTC). The company also launched its new Valkyrie Opportunistic Fund hoping to take advantage of the fact the GBTC is trading at a major discount.
Valkyrie Proposes to Become GBTC’s New Sponsor and Manager
In its letter, Valkyrie outlines three key ways in which their potential management of GBTC could be an improvement over the current situation. The first is the facilitation of orderly redemptions via Regulation M filings. The second comes in the form of lowered fees. Valkyrie proposes a fee of 75 basis points as opposed to the current 200.
Third, Valkyrie wished to offer redemptions both of Bitcoin and cash to investors. The firm’s letter also takes the time to acknowledge “the important role” Greyscale has played with its management of GBTC. However, it also expresses the belief that Valkyrie would be a better fit for the fund under the current circumstances.
In addition to our expertise in digital asset management, we have a team of experienced closed-end fund managers who, while at Guggenheim Partners, launched, managed and even took over a closed end fund from another manager who let the discount slip well beyond 10% without taking action. We are well-equipped to handle the unique challenges and opportunities presented by GBTC. Our combination of technical and regulatory knowledge and hands-on experience makes us the ideal choice to take on this role.
GBTC’s 2022 Woes
Grayscale’s Bitcoin Trust has been trading at a significant discount for much of the year. The discount refers to the price difference between GBTC and the underlying Bitcoin it holds. Traditionally, the difference was positive like in 2015 when the fund was trading at a 20% premium. With the market conditions prevalent throughout 2022, things have changed significantly for Grayscale’s BTC trust.
By early October, the GBTC discount reached a record high of 36%. The price difference only deepened throughout the year and broke new ground already in mid-November when it became 42%. Furthermore, the trend persisted and the discount stood at 47.33% on December 29th.
Grayscale has been trying to shake things up since early 2022. This spring, it started attempting to turn GBTC into an ETF but has been denied permission by the SEC. In June, it sued the Commission over its decision calling it discriminatory, but the SEC remains adamant as the year draws to a close as it was reported it is doubling down on the decision in mid-December.
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