Billion-Dollar Hedge Fund Bets Vs. Bitcoin And Grayscale

The strain continues to mount on Grayscale with its Bitcoin Belief (GBTC) and mum or dad firm Digital Forex Group. And as Ram Ahluwalia, CEO and co-founder of crypto-native funding advisor Lumida, identified in a latest thread, two new characters, Valkyrie Investments and Fir Tree have entered the “Shakespearean drama.”

The motivation of the second, specifically, could be very doubtful. Fir Tree is a hedge fund with about $3 billion in property below administration (AUM) and a whole lot of holdings. The SEC 13F filings present that Fir Tree holds First Citizen’s Financial institution, KKR, Comcast, and a whole lot of different securities. They’re additionally giant traders in oil and tobacco.

Ahluwalia, due to this fact, raises the query of why Fir Tree, as a price investor, has an curiosity in GBTC and filed a lawsuit in opposition to Grayscale in early December, particularly for the reason that hedge fund doesn’t personal loads of GBTC.

Fir Tree Capital Administration filed the lawsuit looking for data that could possibly be used to pressure modifications to the way in which the corporate operates its flagship Bitcoin Belief.

The lawsuit seeks Grayscale to decrease its charges, provoke redemptions, and launch paperwork associated to its relationship with Digital Forex Group. As well as, Fir Tree additionally seeks to cease Grayscale’s efforts to transform its Grayscale Bitcoin Belief (GBTC) right into a spot exchange-traded fund (ETF).

A Huge Brief On Bitcoin, Crypto, And Tether?

Ahluwalia hypothesizes that the arguments made within the lawsuit don’t mirror their true motivation. Fir Tree claims the motivation lies with the “finish traders” comparable to “academics, firefighters, cops, and different public officers” who personal GBTC.

“There’s an even bigger story right here…Be skeptical,” says Ahluwalia, explaining, “Fir Tree is making an even bigger wager in opposition to the crypto ecosystem (USDT, Bitcoin, and many others.) and pushing on all of the softpoints it may well discover.”

On this regard, the Chartered Monetary Analyst (CFA) refers to Bloomberg’s revelation that Fir Tree took a big brief place on Tether (USDT) in March 2022. Fir Tree is betting on a break of the USD/USDT peg, to some extent a “financial institution run” by March 2023.

The place has been structured as an “uneven commerce,” that means that draw back threat is low and potential reward is excessive, with the official rationale for the commerce being that “a lot” of the industrial paper backing the token is tied to Chinese language actual property builders, a few of that are in bother.

Additional, the analyst asserts that Fir Tree has recognized three “softpoints”  of the Bitcoin and crypto market that the hedge fund can rattle: Grayscale, the USDT bond, and Binance, whereas Fir Tree can’t take any motion concerning the change, in line with Ahluwalia. On GBTC, the analyst notes:

Happily, I don’t see a reputable path to Grayscale Belief unwinding. The Belief is a cashcow and may obtain a personal valuation from a third celebration purely on cashflows. What Fir Tree is doing is pushing on the free legs of the stool.

With the lawsuit, Fir Tree could possibly be attempting to scale back the possibilities of DCG elevating exterior capital whereas its personal wager nonetheless has about 3 months to run. It’s also not clear from the 13F filings whether or not the hedge fund can be brief Bitcoin or has OTM places on BTC.

Enemy Of My Enemy Is My Pal Dynamic

Valkyrie, even when with “heroic” intentions, doesn’t make the scenario any simpler as they suggest to take over the function of managing GBTC and scale back charges from 2% to 75 foundation factors. As well as, Valkyrie would use Reg M. Each would damage Grayscale’s valuation.

“My opinion is that Fir Tree is making an attempt to harm the likelihood of a VC increase and push DCG over the sting. […] Fir Tree and Valkyrie are unusual bedfellows. Fir Tree is betting in opposition to Tether. Valkyrie is positioned because the hero for Bitcoin/GBTC holders. This an ‘enemy of my enemy is my buddy’ dynamic”, Ahluwalia says.

For Bitcoin traders, the unresolved scenario round DCG and Grayscale thus stays one of many greatest potential dangers for additional crypto-intrinsic market turmoil. At press time, the BTC worth was at $16,624.

Featured picture from Kanchanara / Unsplash, Chart from TradingView.com