grayscale investments, manager of the largest bitcoin investment fund in the worldGTBC, is accused of plotting a billionaire’s bankruptcy, according to investors angry with the company.
Since 2015, the GBTC fund has been marketed as an easy way for wealthy people to invest in bitcoin. The value of GBTC shares is tied to the price of bitcoin, with a fraction of bitcoin tied to each new share created.
GBTC shares are owned by hundreds of thousands of investors and are down to 52% of bitcoin’s value as of mid-December 2021, meaning shareholders can claim just $0.52 for every $1 worth of bitcoin they own. .
The situation has created a multi-billion dollar hole in investors’ pockets, leaving many in a state of uncertainty. One shareholder told Wired that he has about $200,000 worth of bitcoin through the fund and is worried he won’t be able to pay back all of his money.
Another investor, who bought about $30,000 worth of bitcoin through GBTC, says the financial situation didn’t hurt him too much, but the trust “damaged” his marriage, with his wife calling him a “bitcoin fool.” and feared the loss will be permanent.
angry investors
A group of investors led by David Bailey, founder of BTC Inc and hedge fund UTXO Management, is trying to take down Grayscale, which controls the Bitcoin Trust (GBTC). They want Grayscale to lower the management fee, which is calculated based on the fund’s bitcoin holdings rather than the stock price.
The group claims that Gayscale makes recording difficult, charging unfair fees for the service and that the product is no longer aligned with the needs of the market. Many GBTC shareholders are individual investors who have tied their savings to the product and believe they are diversifying their portfolios.
The leader of the group claims that more than 50 institutions, some with investments of several hundred million dollars in GBTC, support the uprising, representing at least 20% of GBTC shares.
While unable to provide evidence, Bailey provided data on his website traffic and form submission data suggesting that at least 2,000 investors have joined the campaign.
Grayscale CEO Michael Sonnenshein says the company has no intention of relinquishing its role, citing the company’s trust agreement. However, activists believe that the wave of people wanting to leave GBTC will put pressure on the company.
Steven McClurg, chief investment officer at asset management firm Valkyrie and another leader of the campaign, stated that there are many ways to effect change, but did not elaborate on what that means, describing this information as a “secret ingredient”.
“Our expectation is that with the huge wave of people wanting to get out of this thing, there will be pressure.”says McClurg.
Redeem GBTC
Investors created the group Redeem GBTC and want Grayscale to reduce its 2% management fee, which they describe as “predatory”, and demand that Grayscale allow investors to exchange their shares directly for bitcoin.
According to lawyers representing the group, the fee is “perverse” and is intended to make looting difficult. Further, describe that they are currently “hostages” of the company.
The situation is unique because GBTC is sold on brokerage platforms in individual retirement accounts, meaning many individual investors have tied their savings to the product and believe they are diversifying their portfolios.
grayscale in crisis
Grayscale has faced criticism and legal action from several investor groups that hold shares in the Grayscale Bitcoin Trust (GBTC). Osprey Funds has filed a lawsuit against Grayscale for allegedly making false statements in its advertising, creating the impression that the conversion of the GBTC into an ETF was certain.
For its part, Grayscale believes that converting the GBTC into an ETF is the best long-term product structure for investors and is confident that the ETF will be approved.
Grayscale claims the lawsuits against it are baseless and frivolous. Jennifer Rosenthal, Vice President of Communications at Grayscale, says the company is 100% committed to converting the GBTC into an ETF.
However, the situation is deadlocked and Grayscale faces the possibility of a mudslide as investors may want to buy back their shares amid the recent negative wave on DCG and its subsidiaries.
Grayscale’s strategy, according to the group of angry investors, is to limit redemptions and fight legal battles in any area.
The situation is ongoing and uncertain, but it suggests that Grayscale is under intense pressure from investors and may need to rethink its strategy to maintain market confidence.
The company faces the possibility of losing investors and facing a decline in revenue due to the various pending lawsuits and litigation.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
