The descent of Digital Currency Group [DCG] kickstarted a contagion that prompted the downfall of its crypto lender Genesis. Similarly, the DCG crisis may have disrupted the lawsuit that Grayscale had issued against the Securities and Exchange Commission [SEC].
According to a recent report, oral arguments between Grayscale and the SEC were scheduled to occur sometime in the second quarter of 2023. However, in a new turn of events, both these parties are expected to appear before the court at 9:30 a.m. ET on March 7.
Cryptocurrency exchange trader products [ETF] have been quite controversial in the United States. A wide majority of Bitcoin and Ethereum ETF applications were blatantly rejected. Nevertheless, the approval of a few others like the ProShares‘ futures-based Bitcoin ETF prompted firms to pursue the same.
Consequently, Grayscale hopped onto this bandwagon in June 2022. But following multiple delays, the SEC poured cold water on Grayscale’s ETF ambitions. The SEC highlighted Grayscale’s inability to respond to inquiries regarding investor protection and market manipulation as the reason for rejection.
This in turn forced the firm to issue a lawsuit against the SEC. Moreover, there are several shortcomings of Grayscale as well. The primary one points to its parent company DCG which is currently in crisis. Several speculate that Grayscale could succumb to the contagion similar to Genesis.
Secondly, the firm charges a 2% annual fee to investors. Furthermore, in order to provide shareholders with a better route to lower management fees and the introduction of a redemption program, Valkyrie and Osprey Funds have both requested Grayscale to resign as the sponsor of GBTC and designate their funds as the new sponsor. Fir Tree Capital Management has even filed a lawsuit against Grayscale for alleged GBTC conflicts of interest and probable mismanagement.
Here’s how the Grayscale Bitcoin Trust is faring
Currently, GBTC entails about $14.5 billion in assets under management. The GBTC stock price, however, is up by 0.82% and was priced at $12.28.
It should be noted that Cathie Wood of Ark Invest went on to dump 500K GBTC shares last week. Ark purchased 450,272 GBTC shares worth $4.5 million back in November 2022 when GBTC was priced around $7.46-$9.48.