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Grayscale Investments

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Grayscale Investments
Company typeSubsidiary
IndustryFinance
Founded2013; 11 years ago (2013)
Headquarters
Stamford, Connecticut
,
United States
Key people
Michael Sonnenshein (CEO)[1]
ServicesAsset management
AUMUS$50 billion (2021)
ParentDigital Currency Group
Websitegrayscale.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]

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 against the SEC on Aug 29, 2023.[20]

References

  1. ^ Rooney, Kate (January 14, 2021). "Crypto investment firm Grayscale sees 900% jump in assets to $20 billion amid bitcoin frenzy". CNBC. 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. Retrieved February 22, 2022.
  4. ^ Basar, Shanny (February 18, 2022). "Grayscale Investments Aims to Gain Share in US ETFs". Traders Magazine. Retrieved June 22, 2022.
  5. ^ Tepper, Fitz (October 27, 2015). "Barry Silbert Launches Digital Currency Group With Funding From MasterCard, Others". TechCrunch. Retrieved June 22, 2022.
  6. ^ Rosenfeld, Everett (April 1, 2015). "Public trading could begin next week for bitcoin fund". CNBC. Retrieved June 22, 2022.
  7. ^ Casey, Michael J. (March 1, 2015). "BIT Poised to Become Publicly Traded Bitcoin Fund". The Wall Street Journal. Retrieved June 22, 2022.
  8. ^ Son, Hugh (October 15, 2021). "Grayscale Investments close to filing application for spot bitcoin ETF, source says". CNBC. 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. Retrieved June 22, 2022.
  10. ^ Schlegel, Jeff (October 15, 2019). "Finra OKs OTC Listing Of Digital Currencies Fund". Financial Advisor. Retrieved June 22, 2022.
  11. ^ del Castillo, Michael (August 6, 2020). "20 Institutional Bitcoin Investors Revealed, But Soon The List May Vanish". Forbes. Retrieved June 22, 2022.
  12. ^ Ehrlich, Steven (November 30, 2021). "Grayscale Investments Launches Trust With Exposure To Ethereum Competitor Solana". Forbes. Retrieved June 22, 2022.
  13. ^ a b Howcroft, Elizabeth (May 16, 2022). "Grayscale to launch digital assets ETF in UK, Italy, Germany". Reuters. Retrieved June 22, 2022.
  14. ^ Rooney, Kate (November 1, 2021). "Grayscale-parent Digital Currency Group tops $10 billion valuation with SoftBank, Alphabet investments". CNBC. Retrieved June 22, 2022.
  15. ^ Sutton, Sam; O'donnell, Katy; Weaver, Aubree Eliza (July 1, 2022). "No holiday break for crypto". Politico. Retrieved July 8, 2022.
  16. ^ Harty, Declan (June 30, 2022). "Grayscale escalates spot Bitcoin ETF debate with lawsuit against SEC". Fortune. Retrieved February 22, 2022.
  17. ^ "Bitcoin teeters after Grayscale owner DCB reveals it's $2bn in debt". uk.finance.yahoo.com. November 25, 2022. Retrieved January 7, 2023.
  18. ^ Levine, Matt (March 7, 2023). "FTX Wants Its Bitcoins Back From Grayscale". Bloomberg News. 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. Retrieved June 5, 2023.
  20. ^ Lang, Hannah (August 29, 2023). "Explainer: Understanding Grayscale's victory in spot bitcoin ETF case". Reuters. Retrieved September 6, 2023.
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