Grayscale’s GBTC stakeholders cannot dump assets to raise capital

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Bitcoin
Grayscale’s GBTC stakeholders cannot dump assets to raise capital

The CEO of the renowned Messari blockchain research company, Ryan Selkis, took to Twitter to share his perspective on the ongoing troubles with Grayscale and the attempt of its stakeholders to raise capital to prevent it from imminent collapse. Sharing his views on Monday, Selkis said those stakeholders cannot just dump off their holdings on the market.

They can’t dump on the market

Selkis utilized his Twitter thread to explain, first, that the controlling shareholders of Grayscale‘s GBTC, Digital Currency Group, and Genesis Global, can’t simply dump their GBTC. He said it is part of the companies’ liquidity crisis, but it is also not really good news for GBTC shareholders in the midst of the FUD fighting. The reason why that can’t be done is that there are specific rules in public markets.

According to Selkis, the US Securities Act of 1993 under Rule 144A is clear concerning such matters. The rule demands that OTC-traded entity issuers should give advanced notice before any sales. The rule also imposes a cap of 1% on quarterly outstanding shares sales or weekly volumes. 

According to the analysis done by Selkis, this amounts to a maximum quarterly liquidation of $62 million with regard to the outstanding shares. And also $23 million worth of liquidation for a quarter with regard to the trading volume test. He finally said it is very like that DCG and Genesis get financed by putting up their GBTC for collateral.

An exclusive preserve

The Grayscale Bitcoin Trust is the largest Bitcoin investment across the globe. It is now trading at a net asset value discount of 40% as a result of the liquidity problems faced by Genesis Global and insolvency rumors going around concerning Digital Currency Group. Digital Currency Group is said to have purchased GBTC shares worth $800 million since it began to trade at the discounted net asset value.

Digital Currency Group and its affiliates currently own 10% of GBTC’s outstanding shares. Rumors began to go around about DCG having insolvency issues after Genesis put a hold on withdrawals on its platform on the 16th of November. The rumor had it that DCG would have to liquidate its assets before it could pay its creditors.

Grayscale cleared the air that the laws, documents, and other regulations defining Grayscale asset products do not permit the assets to be borrowed or lent. And the BTC that underlines Grayscale Bitcoin Trust and the property of GBTC alone.

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Ifeanyi Egede

Ifeanyi Egede is an experienced and versatile writer and researcher. He has keen interest in blockchain technology, cryptocurrencies, NFTs, Web3, metaverse, fintech and emerging technologies. He has tons of published works both online and in the print media. He has close to a decade of writing experience. When he is not writing, he spends time with his lovely wife and kids.