The stress continues to mount on Grayscale with its Bitcoin Trust (GBTC) and dad or mum firm Digital Currency Group. And as Ram Ahluwalia, CEO and co-founder of crypto-native funding advisor Lumida, identified in a latest thread, two new characters, Valkyrie Investments and Fir Tree have entered the “Shakespearean drama.”
The motivation of the second, specifically, could be very doubtful. Fir Tree is a hedge fund with about $3 billion in property underneath administration (AUM) and lots of of holdings. The SEC 13F filings present that Fir Tree holds First Citizen’s Bank, KKR, Comcast, and lots of of different securities. They are additionally giant traders in oil and tobacco.
Ahluwalia, subsequently, raises the query of why Fir Tree, as a worth investor, has an curiosity in GBTC and filed a lawsuit towards Grayscale in early December, particularly for the reason that hedge fund doesn’t personal loads of GBTC.
Fir Tree Capital Management filed the lawsuit looking for info that may very well be used to power modifications to the way in which the corporate operates its flagship Bitcoin Trust.
The lawsuit seeks Grayscale to decrease its charges, provoke redemptions, and launch paperwork associated to its relationship with Digital Currency Group. In addition, Fir Tree additionally seeks to cease Grayscale’s efforts to transform its Grayscale Bitcoin Trust (GBTC) right into a spot exchange-traded fund (ETF).
A Big Short On Bitcoin, Crypto, And Tether?
Ahluwalia hypothesizes that the arguments made within the lawsuit don’t mirror their true motivation. Fir Tree claims the motivation lies with the “end investors” corresponding to “teachers, firefighters, police officers, and other public officials” who personal GBTC.
“There’s a bigger story here…Be skeptical,” says Ahluwalia, explaining, “Fir Tree is making a bigger bet against the crypto ecosystem (USDT, Bitcoin, etc.) and pushing on all the softpoints it can find.”
In this regard, the Chartered Financial Analyst (CFA) refers to Bloomberg’s revelation that Fir Tree took a big quick place on Tether (USDT) in March 2022. Fir Tree is betting on a break of the USD/USDT peg, to some extent a “bank run” by March 2023.
The place has been structured as an “asymmetric trade,” which means that draw back danger is low and potential reward is excessive, with the official rationale for the commerce being that “much” of the industrial paper backing the token is tied to Chinese actual property builders, a few of that are in bother.
Further, the analyst asserts that Fir Tree has recognized three “softpoints” of the Bitcoin and crypto market that the hedge fund can rattle: Grayscale, the USDT bond, and Binance, whereas Fir Tree can not take any motion concerning the alternate, in line with Ahluwalia. On GBTC, the analyst notes:
Fortunately, I don’t see a reputable path to Grayscale Trust unwinding. The Trust is a cashcow and might obtain a non-public valuation from a third social gathering purely on cashflows. What Fir Tree is doing is pushing on the unfastened legs of the stool.
With the lawsuit, Fir Tree may very well be attempting to scale back the probabilities of DCG elevating outdoors capital whereas its personal wager nonetheless has about 3 months to run. It can be not clear from the 13F filings whether or not the hedge fund can be quick Bitcoin or has OTM places on BTC.
Enemy Of My Enemy Is My Friend Dynamic
Valkyrie, even when with “heroic” intentions, doesn’t make the state of affairs any simpler as they suggest to take over the position of managing GBTC and cut back charges from 2% to 75 foundation factors. In addition, Valkyrie would use Reg M. Both would harm Grayscale’s valuation.
“My opinion is that Fir Tree is attempting to hurt the probability of a VC raise and push DCG over the edge. […] Fir Tree and Valkyrie are strange bedfellows. Fir Tree is betting against Tether. Valkyrie is positioned as the hero for Bitcoin/GBTC holders. This an ‘enemy of my enemy is my friend’ dynamic”, Ahluwalia says.
For Bitcoin traders, the unresolved state of affairs round DCG and Grayscale thus stays one of many largest potential risks for additional crypto-intrinsic market turmoil. At press time, the BTC value was at $16,624.
Featured picture from Kanchanara / Unsplash, Chart from TradingView.com
