Grayscale Resumes Private Placement for Accredited Investors

Grayscale Resumes Private Placement for Accredited Investors

Grayscale Investments, a fund manager that allows investors to gain passive exposure to cryptocurrency, is restarting its private placement for its Bitcoin investment trust. In a press release by the company, they highlight the details of the placement and what passive exposure to BTC entails, July 8, 2019.

Traditional Investment Vehicle, Innovative Tech

The Grayscale Bitcoin Trust (GBTC) gives investors the opportunity to gain exposure to cryptocurrencies without the hassles of self custody and using shady exchanges. The value of the shares are meant to represent an equivalent claim to a certain amount of BTC – just as equities do.

Currently, each share in GBTC translates to .00097876 BTC or 97,876 satoshis. At the time of writing, the market value of this is $12.4 but GBTC is trading at $15.3.

As notified by the company in their prospectus, there is no guarantee for the redemption of BTC, hence the trust may trade at a premium or discount to market value based on sentiment. Generally, illiquid investment vehicles trade at discount for their lack of marketability, but during bull markets, this reverses on GBTC owing to massively irrational outlooks.

In June 2019, BTCManager reported that the Grayscale trusts were trading at unhealthy premiums. This is the largest drawback of gaining cryptocurrency exposure through the traditional trust route.

Grayscale Bitcoin Trust has nearly $2.66 billion in assets under management (AUM). The privately placed shares have a sale restriction, constraining investors from selling their holdings before a year. Because of this, Grayscale warns investors to buy into the trust only if they can afford to keep their money tied up for a year. Interested parties have been requested to go through the placement memorandum available on the website before taking any investment decisions.

Are Accredited Investor Laws Archaic or Justified?

With the entire ICO bubble and the onslaught of IEO’s, accreditation law debates are resurfacing.

The argument for investor accreditation laws uses the ICO bubble as an example of how easy it is to defraud retail investors.

These laws keep the risk of early-stage business confined to those with investment expertise and sufficient wealth to be able to handle a loss of such magnitude. Further, the removal of these laws would cause an influx of fundraising and several fraudulent schemes.

On the other hand, people use the entire concept of bitcoin and other successful cryptocurrencies to show how regular people are being deprived of investment opportunities to augment their wealth.

Both sides have a fair point, but it’s certain that these laws are going nowhere as securities regulators first and foremost responsibility to ensure the protection of investors in capital markets.

Ashwath Balakrishnan

Ashwath is a financial market and technology junkie. He is a cryptocurrency investor, trader, and enthusiast. He has expertise in market psychology and explaining complex technology in a simple way. He aims to battle misinformation in the cryptocurrency space.