According to a new Twitter Publish Grayscale Bitcoin Trust (GBTC) majority shareholders Genesis Global and Digital Currency Group cannot simply “empty” their holdings to raise more capital, according to Ryan Selkis, CEO of blockchain research firm Messari. Selkis explained that the restrictions are due to Rule 144A of the US Securities Act of 1933, which requires issuers of over-the-counter, or OTC, entities to give notice of proposed sales, as well as a quarterly cap on the sale of either 1% of outstanding shares or weekly trading volume.
2/ DCG has bought almost $800 million worth of GBTC shares since the premium became a discount in early 2021.
The DCG board has authorized up to $1.2 billion in stock purchases in Grayscale Trusts.
Given current cash flow issues, the rest is likely on hold indefinitely.
— Ryan Selkis (@twobitidiot) November 28, 2022
Based on calculations provided by Selkis, this works out to a maximum of $62 million in liquidations per quarter based on the outstanding stock test and $23 million in liquidations per quarter based on the volume test. transactions. “DCG-Genesis is *much* more likely to refinance using GBTC as collateral,” he wrote.
Grayscale Bitcoin Trust, the world’s largest Bitcoin investment trust, is currently trading at a discount to the net asset value (NAV) of 40% due to liquidity issues surrounding its operator Genesis Global and insolvency rumors surrounding its owner Digital Currency Group. Digital Currency Group is said to have purchased nearly $800 million worth of GBTC shares since it began trading at a discount to NAV. The company and its affiliates now own approximately 10% of the trust’s outstanding shares.
After Genesis Global began halting withdrawals on November 16, rumors began circulating that its parent company Digital Currency Group was also in a state of insolvency and would have to liquidate GBTC to pay off its creditors. Grayscale has since clarified that “the laws, regulations, and documents that define Grayscale’s digital asset products prohibit the digital assets underlying the products from being lent, borrowed, or otherwise encumbered” and that “the $BTC underlying Grayscale Bitcoin Trust is owned to $GBTC and $GBTC alone.”
Grayscale also released a letter signed by Coinbase CFO Alesia Haas and Coinbase Custody CEO Aaron Schnarch showing that he currently holds 635,235 Bitcoin (BTC) in custody on behalf of Grayscale.