Crypto asset manager Osprey Funds is the latest to call out Barry Silbert’s Grayscale Investments over its Bitcoin trust’s deep discount, announcing that it asked to be installed by its bigger rival as the sponsor of the beleaguered product in order to spur changes that could help narrow that gap.
(Bloomberg) — Crypto asset manager Osprey Funds is the latest to call out Barry Silbert’s Grayscale Investments over its Bitcoin trust’s deep discount, announcing that it asked to be installed by its bigger rival as the sponsor of the beleaguered product in order to spur changes that could help narrow that gap.
Osprey, writing Friday in an open letter to Silbert, said it would reduce the management fee of the $12 billion Grayscale Bitcoin Trust (GBTC) to 0.49% from its current 2%, which has been a sore point with some of its investors. The Fairfield, Connecticut-based company also said it would look to implement a redemption program to help narrow the discount that’s plagued the fund since early 2021, and would pursue a listing on the New York Stock Exchange.
“Effective management of the Grayscale Bitcoin Trust requires specific expertise and the trust of both regulators and all market participants,” said the letter, which was authored by Osprey Funds CEO Greg King. “Grayscale and Osprey are the only providers with the required skillset, but only Osprey has the trust.”
A Grayscale spokeswoman declined to comment.
Separately, Osprey said it is exploring a way to redeem shares in its own Bitcoin trust, which trades under OBTC. King controls both Osprey and REX Shares, which have combined assets under management of more than $1.5 billion.
Grayscale has come under fire recently, thanks in part to GBTC trading at a large discount to its underlying Bitcoin, as well as due to issues its parent company Digital Currency Group is dealing with as the crypto industry undergoes a dark stretch following the collapse of FTX. Hedge fund Fir Tree filed a lawsuit against the asset manager related to GBTC’s discount, while Valkyrie launched an activist campaign to unseat Grayscale.
The crux of the issue is GBTC’s structure: While new shares can be created, they can’t be destroyed as demand for the trust’s underlying Bitcoin cools, resulting in a discount to net asset value. Grayscale attempted to convert GBTC into an exchange-traded fund, a wrapper that allows for share redemptions. The US Securities and Exchange Commission rejected the move in June, spurring Grayscale to file a lawsuit against the agency within hours. Grayscale on Friday filed what’s called a reply brief to the SEC as part of the suit.
To be sure, Grayscale filings state that shareholders take no part in the management or control of the trust, and have limited voting rights. In addition, no amendments to the trust agreement that could materially affect the interests of shareholders can be made without a vote of at least a majority — meaning 50% — of the shares.
Valkyrie, meanwhile, announced the launch of the Valkyrie Opportunistic Fund, which seeks to take advantage of the GBTC discount. The Valkyrie fund will be increasing its holdings of GBTC, allowing the company to realize “the true value of the underlying Bitcoin for our investors,” which it says is a goal it will actively pursue on their behalf, according to the firm.
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