Grayscale Investments

Last updated

Grayscale Investments
Company typeSubsidiary
IndustryFinance
Founded2013;11 years ago (2013)
Headquarters
Stamford, Connecticut
,
United States
Key people
Michael Sonnenshein (CEO) [1]
Services Asset management
AUM US$50 billion (2021)
Parent Digital Currency Group
Website grayscale.com

Grayscale Investments is an American digital currency asset management company and subsidiary of Digital Currency Group founded in 2013 [2] and based in Stamford, Connecticut. [3]

Contents

History

Grayscale was founded in 2013, launching a bitcoin trust that year. [4] In 2015, the company became a subsidiary of Digital Currency Group. [5] The same year, Grayscale Bitcoin Trust (OTCQX :  GBTC) began trading over-the-counter on the OTCQX market, becoming the first publicly traded bitcoin fund in the United States. The company charged higher than average fees compared to similar exchange-traded funds (ETFs), but said the fees were to cover the costs of trading bitcoin. [6] [7] Grayscale sought to turn GBTC into an ETF in 2017, but voluntarily withdrew the application following negative remarks from the SEC. [8]

In 2017, Grayscale launched two additional cryptocurrency investment funds which held Ethereum Classic and Zcash. The following year, the company launched its fourth cryptocurrency fund, the Digital Large Cap Fund (GDLC), initially holding bitcoin, Ether, Litecoin, Ripple, and Bitcoin Cash. [9] GDLC began trading publicly in October 2019. [10] GBTC became an SEC-reporting bitcoin investment fund in 2020. As such, it files publicly available financial disclosure forms, including the quarterly Form 10-Q and annual Form 10-K. [11]

In 2021, the company added Grayscale Solana Trust to its portfolio, the 16th such fund it manages. [12] The company managed digital assets totalling $50 billion. [13] [14]

In 2022, Grayscale launched an ETF traded on American, British, Italian, and German exchanges that tracks the Bloomberg Grayscale Future of Finance Index, consisting of a blend of companies, including asset managers, exchanges, brokerages, and cryptocurrency miners. [13] In June 2022, the SEC denied Grayscale's request to turn GBTC into an exchange-traded fund, citing concerns about the lack of oversight over cryptocurrencies and the risk of price fixing. [15] The denial prompted Grayscale to sue the agency. [16]

As of November 2022, the Grayscale Bitcoin Trust holds one of the largest shares of bitcoin (BTC), with 643,572 BTC, worth about $10.6 billion, approximately 3% of all Bitcoin currently available. [17]

For much of GBTC's existence, investors in the trust including Alameda Research engaged in arbitrage trades based on the difference in price between GBTC’s shares and the corresponding amount of bitcoin. At the time of Alameda’s bankruptcy, shares of GBTC were trading at a lower value than the corresponding amount of bitcoin held by the trust. [18] Alameda's post-bankruptcy management sued Grayscale in 2023 to recover the value of the shares in bitcoin. [19]

In 2022, the SEC denied the conversion of Grayscale Bitcoin Trust into an ETF because of alleged lack of surveillance capabilities. Grayscale filed a case against the SEC arguing that the former allowed Bitcoin Futures ETF. Now, both Futures ETF and Spot ETF relied on the same underlying, i.e., Bitcoin. Grayscale while following the same surveillance measures was denied a license. Finally, it won the case by unanimous vote in the United States Court of Appeals for the District of Columbia Circuit on August 29, 2023. [20] The move paved the way for multiple bitcoin ETFs - from ARK Investments, BlackRock, and Fidelity, as well as Grayscale - to come to market and allow for greater adoption for both institutional and retail investors. That was due, in part, to ETFs and retail investing being more regulated than other investments and because some institutional investors are prevented from investing directly in alternative assets. [21] Michael Sonnenshein suggested his firm's ETF would survive, along with a few others, but most wouldn't see widespread interest and adoption. [22]

Related Research Articles

An exchange-traded fund (ETF) is a type of investment fund that is also an exchange-traded product, i.e., it is traded on stock exchanges. ETFs own financial assets such as stocks, bonds, currencies, debts, futures contracts, and/or commodities such as gold bars. The list of assets that each ETF owns, as well as their weightings, is posted on the website of the issuer daily, or quarterly in the case of active non-transparent ETFs. Many ETFs provide some level of diversification compared to owning an individual stock.

A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies. A cryptocurrency exchange can be a market maker that typically takes the bid–ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.

<span class="mw-page-title-main">Bitcoin</span> Decentralized digital currency

Bitcoin is the first decentralized cryptocurrency. Nodes in the peer-to-peer bitcoin network verify transactions through cryptography and record them in a public distributed ledger, called a blockchain, without central oversight. Consensus between nodes is achieved using a computationally intensive process based on proof of work, called mining, that requires increasing quantities of electricity and guarantees the security of the bitcoin blockchain.

<span class="mw-page-title-main">Cryptocurrency</span> Digital currency not reliant on a central authority

A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.

<span class="mw-page-title-main">WisdomTree Investments</span> U.S. ETF and ETP asset manager company

WisdomTree, Inc. is a global exchange-traded fund (ETF) and exchange-traded product (ETP) sponsor and asset manager with headquarters in New York. WisdomTree launched its first ETFs in June 2006, and became one of the major ETF providers in the United States. WisdomTree sponsors different ETFs that span asset classes and countries worldwide. Categories include: U.S. and International Equity, Currency, Fixed Income and Alternatives.

Coinbase Global, Inc., branded Coinbase, is an American publicly traded company that operates a cryptocurrency exchange platform. Coinbase is a distributed company; all employees operate via remote work. It is the largest cryptocurrency exchange in the United States in terms of trading volume. The company was founded in 2012 by Brian Armstrong and Fred Ehrsam. In May 2020, Coinbase announced it would shut its San Francisco, California, headquarters and change operations to remote-first, part of a wave of several major tech companies closing headquarters in San Francisco in the wake of the COVID-19 pandemic.

Circle is a peer-to-peer payments technology company that now manages stablecoin USDC, a cryptocurrency the value of which is pegged to the U.S. dollar. It was founded by Jeremy Allaire and Sean Neville in October 2013. Circle is headquartered in Boston, Massachusetts. USDC, the second largest stablecoin worldwide, is designed to hold at or near a stable price of $1. The majority of its stablecoin collateral is held in short-term U.S. government securities.

CoinDesk is a news site specializing in bitcoin and digital currencies. Founded by Shakil Khan, the firm also provides guides to bitcoin for those new to digital currencies.

Kraken is a United States–based cryptocurrency exchange, founded in 2011. It was one of the first bitcoin exchanges to be listed on Bloomberg Terminal and was valued at US$10.8 billion in mid-2022. The company has been the subject of several regulatory investigations since 2018, and has agreed to cumulative fines of over $30 million.

Gemini Trust Company, LLC (Gemini) is an American cryptocurrency exchange and custodian bank. It was founded in 2014 by Cameron and Tyler Winklevoss.

<span class="mw-page-title-main">Digital Currency Group</span> American venture capital company

Digital Currency Group (DCG) is a venture capital company focusing on the digital currency market. It is located in Stamford, Connecticut. The company has the subsidiaries Foundry, Genesis, Grayscale Investments, and Luno. It also formerly owned CoinDesk.

An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cryptocurrency is sold in the form of "tokens" ("coins") to speculators or investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ether. The tokens are promoted as future functional units of currency if or when the ICO's funding goal is met and the project successfully launches.

A cryptocurrency bubble is a phenomenon where the market increasingly considers the going price of cryptocurrency assets to be inflated against their hypothetical value. The history of cryptocurrency has been marked by several speculative bubbles.

Binance Holdings Ltd., branded Binance, is a global company that operates the largest cryptocurrency exchange in terms of daily trading volume of cryptocurrencies. Binance was founded in 2017 by Changpeng Zhao, a developer who had previously created high-frequency trading software. Binance was initially based in China, then moved to Japan shortly before the Chinese government restricted cryptocurrency companies. Binance subsequently left Japan for Malta and currently has no official company headquarters.

Paxos Trust Company is a New York–based financial institution and technology company specializing in blockchain. The company's product offerings include a cryptocurrency brokerage service, asset tokenization services, and settlement services. ItBit, a bitcoin exchange run by Paxos, was the first bitcoin exchange to be licensed by the New York State Department of Financial Services, granting the company the ability to be the custodian and exchange for customers in the United States.

<span class="mw-page-title-main">Ark Invest</span> American asset management firm

ARK Investment Management LLC is an American investment management firm based in St. Petersburg, Florida, that manages several actively managed exchange-traded funds (ETFs). It was founded by Cathie Wood in 2014. At the height of February 2021, the company had US$50 billion in assets under management. As of October 2023, assets had dropped to $6.71 billion, after a period of poor performance.

<span class="mw-page-title-main">Celsius Network</span> American cryptocurrency company

Celsius Network LLC was a cryptocurrency company. Headquartered in Hoboken, New Jersey, Celsius maintained offices in four countries and operated globally. Users could deposit a range of cryptocurrency digital assets, including Bitcoin and Ethereum, into a Celsius wallet to earn a percentage yield, and could take out loans by pledging their cryptocurrencies as security. As of May 2022, the company had lent out $8 billion to clients and had almost $12 billion in assets under management.

Three Arrows Capital was a Singapore-based cryptocurrency hedge fund which was ordered to liquidate on 27 June 2022 by a court in the British Virgin Islands. It was founded in 2012 by Kyle Davies and Su Zhu. The company borrowed billions of dollars to fund its trading, and according to July 2022 bankruptcy filings, faces $3.5 billion in creditors' claims. The fund appears to have lost in excess of $3 billion over 2021 and 2022, making its collapse one of the largest hedge-fund trading losses of all time.

The bankruptcy of FTX, a Bahamas-based cryptocurrency exchange, began in November 2022. The collapse of FTX, caused by a spike in customer withdrawals that exposed an $8 billion hole in FTX’s accounts, served as the impetus for its bankruptcy. Prior to its collapse, FTX was the third-largest cryptocurrency exchange by volume and had over one million users.

Genesis is a cryptocurrency brokerage for institutional investors. It is a subsidiary of Digital Currency Group (DCG).

References

  1. ↑ Rooney, Kate (January 14, 2021). "Crypto investment firm Grayscale sees 900% jump in assets to $20 billion amid bitcoin frenzy". CNBC. Archived from the original on August 15, 2022. Retrieved June 22, 2022.
  2. ↑ Rooney, Kate (November 1, 2018). "Crypto investment firm Grayscale rakes in $330 million this year despite bitcoin bear market". CNBC. Retrieved June 22, 2022.
  3. ↑ Reyes, Max (November 29, 2021). "Crypto Firm Digital Currency Finds New Home in Stamford". Bloomberg. Archived from the original on November 29, 2021. Retrieved February 22, 2022.
  4. ↑ Basar, Shanny (February 18, 2022). "Grayscale Investments Aims to Gain Share in US ETFs". Traders Magazine. Archived from the original on June 25, 2022. Retrieved June 22, 2022.
  5. ↑ Tepper, Fitz (October 27, 2015). "Barry Silbert Launches Digital Currency Group With Funding From MasterCard, Others". TechCrunch . Archived from the original on April 30, 2019. Retrieved June 22, 2022.
  6. ↑ Rosenfeld, Everett (April 1, 2015). "Public trading could begin next week for bitcoin fund". CNBC. Archived from the original on May 12, 2016. Retrieved June 22, 2022.
  7. ↑ Casey, Michael J. (March 1, 2015). "BIT Poised to Become Publicly Traded Bitcoin Fund". The Wall Street Journal . Archived from the original on May 24, 2016. Retrieved June 22, 2022.
  8. ↑ Son, Hugh (October 15, 2021). "Grayscale Investments close to filing application for spot bitcoin ETF, source says". CNBC. Archived from the original on August 15, 2022. Retrieved July 14, 2022.
  9. ↑ Roberts, Daniel (February 7, 2018). "Exclusive: Grayscale launches new 'Digital Large Cap Fund' tied to 5 top cryptocurrencies". Yahoo! Finance . Archived from the original on November 8, 2023. Retrieved June 22, 2022.
  10. ↑ Schlegel, Jeff (October 15, 2019). "Finra OKs OTC Listing Of Digital Currencies Fund". Financial Advisor . Archived from the original on July 17, 2020. Retrieved June 22, 2022.
  11. ↑ del Castillo, Michael (August 6, 2020). "20 Institutional Bitcoin Investors Revealed, But Soon The List May Vanish". Forbes . Archived from the original on August 15, 2022. Retrieved June 22, 2022.
  12. ↑ Ehrlich, Steven (November 30, 2021). "Grayscale Investments Launches Trust With Exposure To Ethereum Competitor Solana". Forbes. Archived from the original on August 15, 2022. Retrieved June 22, 2022.
  13. 1 2 Howcroft, Elizabeth (May 16, 2022). "Grayscale to launch digital assets ETF in UK, Italy, Germany". Reuters . Archived from the original on June 22, 2022. Retrieved June 22, 2022.
  14. ↑ Rooney, Kate (November 1, 2021). "Grayscale-parent Digital Currency Group tops $10 billion valuation with SoftBank, Alphabet investments". CNBC . Archived from the original on November 2, 2022. Retrieved June 22, 2022.
  15. ↑ Sutton, Sam; O'donnell, Katy; Weaver, Aubree Eliza (July 1, 2022). "No holiday break for crypto". Politico . Archived from the original on July 10, 2022. Retrieved July 8, 2022.
  16. ↑ Harty, Declan (June 30, 2022). "Grayscale escalates spot Bitcoin ETF debate with lawsuit against SEC". Fortune . Archived from the original on September 26, 2022. Retrieved February 22, 2022.
  17. ↑ "Bitcoin teeters after Grayscale owner DCB reveals it's $2bn in debt". uk.finance.yahoo.com. November 25, 2022. Archived from the original on November 29, 2022. Retrieved January 7, 2023.
  18. ↑ Levine, Matt (March 7, 2023). "FTX Wants Its Bitcoins Back From Grayscale". Bloomberg News. Archived from the original on March 11, 2023. Retrieved June 5, 2023.
  19. ↑ Asgari, Nikou; Miller, Joe; Gandel, Stephen (March 6, 2023). "FTX's trading affiliate Alameda sues Grayscale over crypto investments". Financial Times. Archived from the original on May 13, 2023. Retrieved June 5, 2023.
  20. ↑ Lang, Hannah (August 29, 2023). "Explainer: Understanding Grayscale's victory in spot bitcoin ETF case". Reuters. Archived from the original on September 6, 2023. Retrieved September 6, 2023.
  21. ↑ "Why a US bitcoin ETF is a game-changer for crypto". Yahoo Finance. January 10, 2024. Retrieved January 20, 2024.
  22. ↑ Kharpal, Arjun (January 19, 2024). "Grayscale CEO says most of the 11 approved bitcoin ETFs won't survive, defends highest fees in industry". CNBC. Retrieved January 20, 2024.
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