Is everything ok with Grayscale?

Good morning! Welcome to The Daily Moon. It’s a brand new week. The class action suit against celebrities who promoted FTX has been quietly dropped. Naomi Osaka, Larry David, and Tom Brady are spared. This judgement may have put in place a precedent for finfluencers. This will be an interesting one. 

Moving on, today we talk about Grayscale’s troubles and fashion conscious metaverse users. 

The markets recovered marginally Bitcoin was at ~$17,200 and Ethereum inched closer to $1,300. Nasdaq fell due to gloomy holiday sales forecasts. Back home, Sensex and Nifty were volatile.   

Endless Shades Of Gray

Sometimes, even the best-laid plans go awry. And it’s even worse if someone’s arranged their whole life around the said plan. That’s exactly what has happened to  Grayscale. 

The digital assets investment company felt that it was going to be allowed to list  a Bitcoin ETF. But the SEC’s rejection came as a hammer blow. Since then, Greyscale hasn’t seen good days.

Grayscale’s investment product Grayscale Bitcoin Trust or GBTC trades at a ~48% discount to the price of the underlying Bitcoin. To simplify, GBTC shares have fallen sharply below the value of the Bitcoin (BTC-USD) that the entity holds. GBTC trades at ~$8 and the BTC holdings per share is valued at ~$15.6. Is this a de-peg we all missed?

Did we tell you that there is another FTX angle? Not directly, but sister company Genesis Trading has $175 million stuck in the exchange. Both Grayscale and Genesis are subsidiaries of the Digital Currency Group. 

Woah, that’s a lot to unpackSo, the discontent among Grayscale investors has been brewing for a while. GBTC slipped to a deep discount situation five months ago and hasn’t been able to recover. 

Grayscale set out with a Plan A in place. That failed. Now Plan B is shaky. 

1. Plan A was to convert GBTC into an exchange-traded fund that will list on stock exchanges. 

2. The SEC rejected Plan A citing market manipulation concerns. In response, Grayscale sued the regulator.

3. Plan B was to do Plan A but with public support. The people who swore to support Grayscale on Twitter didn’t show IRL. Smh.

How did we get here?Grayscale made its debut via GBTC in 2013. The idea was to capture the imagination of Bitcoin investors who were otherwise wary of directly investing in crypto. The fund is SEC registered so GBTC can be bought via brokerage accounts. But, it cannot be traded on exchanges. That’s why, unlike other investment products, GBTC cannot be redeemed for actual Bitcoin. 

There are three fundamental differences between Bitcoin ETFs and GBTC:

1. GBTC is traded privately through dealers and brokers. Bitcoin ETFs are traded on the exchanges.

2. GBTC has a minimum investment amount of $50,000. ETFs don’t. 

3. GBTC trades way lower than its underlying asset Bitcoin. Bitcoin ETFs closely follow BTC’s price. 

The investment company insists that GBTC can be exchanged for BTC when it becomes an ETF. Meanwhile, Grayscale refused to show proof about its reserves, citing security concerns. But a researcher discovered it anyway. 

Ready For the Meta Runway?

Jennie Svoboda is awake almost every other night designing outfits that you may get to wear but not feel. She’s a metaverse designer. As Gen Z gets metaverse-curious, the digital universe now has fashion stylists. 

Who wants them?Outfits are designed either for brands or individuals’ virtual avatars. It’s not a full-time job though, because some outfits are given away for free. 

Price checkJust like NFTs, the outfit can cost higher or lower based on demand. Take the  Carolina Herrera Spring/Summer 2023 gown for instance. It launched at $5 on Roblox and is now at over $5,000. 

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