Warns of Possible ‘Systemic Risk’ – Markets and Prices Bitcoin News
Bytetree Asset Management founder Charlie Morris suggested that GBTC’s management fees could be reduced to alleviate current selling pressure and potentially reduce the stock’s discount. If no action is taken, Morris said, selling pressure will increase and could become a systemic risk.
Current buy-out of AGB Minor
On the other hand, Morris, who is also chief investment officer (CIO) at Byttree, thinks Grayscale’s recent $250 million investment in GBTC may be too small to make a difference. Still, Bittree Morris acknowledges in his Market Health Update that 2020 was a year of record inflows for gray assets. During this period, the premium on GBTC shares averaged 30% and the value of assets under management (AUM) increased to more than $30 billion.
However, as premiums began to decline, the inflow of trust funds also slowed. As a result, the premium on the GBTC share has turned into a discount. However, as Morris explains, this discount could widen if the supply of GBTC securities continues to outstrip demand. In his analysis, Morris said:
The problem is that there is nothing to stop the further expansion of the discount. Grayscale announced a $250 million share purchase, which is substantial but too small to make a difference in the $33 billion fund. To be taken seriously, they must promise to collect this amount every week.
Threat to participants
However, as Morris notes, Grayscale Investments may not be able to buy back more GBTC shares because its legal structure does not allow it to do so (which). Similarly, the IOC says it is not entirely sure of the merits of Grayscale’s plan to launch an ETF that would invest in GBTC in a kind of feeder structure. The director goes on to explain:
When Osprey (OBTC) offers bitcoin exposure at 0.49% APR, you would think GBTC would lower their rates by 2%; they are excessive given the new world of competition. Although Morris sees ETFs as a better alternative, he admits that the only reason investors want/can stay in GBTC is because of capital gains tax.
Meanwhile, Morris concludes his report by saying that he sincerely hopes they will restore investor confidence (on a grey scale) without delay.
Do you agree that the fee reduction will help the Grayscale case? You can share your thoughts below in the comments section.
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