Valkyrie Investments is offering to become the new sponsor and manager of the crypto industry's largest fund, the Grayscale Bitcoin Trust, which is in trouble.
The Nashville, Tennessee-based asset manager, which oversees roughly $180 million, on Friday announced the launch of the Valkyrie Opportunistic Fund, which seeks to take advantage of the massive discount in Grayscale Investments’ $10.5 billion product (GBTC), BNN Bloomberg reports. The Valkyrie Fund will increase its holdings in GBTC, allowing the company to realize “the true value of the underlying Bitcoin for our investors,” which it says is a goal it will actively pursue on their behalf, according to the company.
“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 that they have done,” said Steven McClurg, co-founder and CIO of Valkyrie Investments, in a letter posted on the firm's website. “However, in light of recent events involving Grayscale and its family of affiliated companies, it is time for a change. Valkyrie is the best company to manage GBTC to ensure its investors are treated fairly.”
However, such a move may be unlikely as Grayscale's filings state that shareholders have no involvement in the management or control of the trust and have limited voting rights. In addition, no amendments to the trust agreement that could materially affect the interests of shareholders can be made without a vote of at least a majority—meaning 50%—of the shares.
GBTC is currently trading at around 50% below the value of the Bitcoin it holds. The crux of the problem lies in the structure of GBTC: While new shares can be created, they can’t be destroyed as demand for the trust’s underlying Bitcoin cools, resulting in a discount to net asset value. Grayscale has attempted to transform GBTC into an exchange-traded fund, a shell that allows shares to be bought back. The US Securities and Exchange Commission rejected the move in June, prompting Grayscale to file a lawsuit against the agency.
Valkyrie says proposing to facilitate GBTC redemptions at net-asset value for investors through a Regulation M filing. It is also looking to lower fees to 75 basis points from the trust’s current 200-basis-point tag, and it is seeing redemptions in both Bitcoin and cash for investors.
Valkyrie says its own Bitcoin trust has been operating with daily liquidity since its inception in January 2021. The company also oversees some cryptocurrency exchange-traded funds, including the Valkyrie Bitcoin Strategy ETF.
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Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.