Billion-Dollar Hedge Fund Is Betting Against Bitcoin And Grayscale, Not Just USDT

1 year ago

The unit continues to equine connected Grayscale with its Bitcoin Trust (GBTC) and genitor institution Digital Currency Group. And arsenic Ram Ahluwalia, CEO and co-founder of crypto-native concern advisor Lumida, pointed retired successful a caller thread, 2 caller characters, Valkyrie Investments and Fir Tree person entered the “Shakespearean drama.”

The information of the second, successful particular, is precise dubious. Fir Tree is simply a hedge money with astir $3 cardinal successful assets nether absorption (AUM) and hundreds of holdings. The SEC 13F filings amusement that Fir Tree holds First Citizen’s Bank, KKR, Comcast, and hundreds of different securities. They are besides ample investors successful lipid and tobacco.

Ahluwalia, therefore, raises the question of wherefore Fir Tree, arsenic a worth investor, has an involvement successful GBTC and filed a suit against Grayscale successful aboriginal December, particularly since the hedge money does not ain a batch of GBTC.

Fir Tree Capital Management filed the suit seeking accusation that could beryllium utilized to unit changes to the mode the institution operates its flagship Bitcoin Trust.

The suit seeks Grayscale to little its fees, initiate redemptions, and merchandise documents related to its narration with Digital Currency Group. In addition, Fir Tree besides seeks to halt Grayscale’s efforts to person its Grayscale Bitcoin Trust (GBTC) into a spot exchange-traded money (ETF).

A Big Short On Bitcoin, Crypto, And Tether?

Ahluwalia hypothesizes that the arguments made successful the suit bash not bespeak their existent motivation. Fir Tree claims the information lies with the “end investors” specified arsenic “teachers, firefighters, constabulary officers, and different nationalist officials” who ain GBTC.

“There’s a bigger communicative here…Be skeptical,” says Ahluwalia, explaining, “Fir Tree is making a bigger stake against the crypto ecosystem (USDT, Bitcoin, etc.) and pushing connected each the softpoints it tin find.”

In this regard, the Chartered Financial Analyst (CFA) refers to Bloomberg’s revelation that Fir Tree took a ample abbreviated presumption connected Tether (USDT) successful March 2022. Fir Tree is betting connected a interruption of the USD/USDT peg, to immoderate grade a “bank run” by March 2023.

The presumption has been structured arsenic an “asymmetric trade,” meaning that downside hazard is debased and imaginable reward is high, with the authoritative rationale for the commercialized being that “much” of the commercialized insubstantial backing the token is tied to Chinese existent property developers, immoderate of which are successful trouble.

Further, the expert asserts that Fir Tree has identified 3 “softpoints” of the Bitcoin and crypto marketplace that the hedge money tin rattle: Grayscale, the USDT bond, and Binance, whereas Fir Tree cannot instrumentality immoderate enactment regarding the exchange, according to Ahluwalia. On GBTC, the expert notes:

Fortunately, I don’t spot a credible way to Grayscale Trust unwinding. The Trust is simply a cashcow and tin person a backstage valuation from a 3rd enactment purely connected cashflows. What Fir Tree is doing is pushing connected the escaped legs of the stool.

With the lawsuit, Fir Tree could beryllium trying to trim the chances of DCG raising extracurricular superior portion its ain stake inactive has astir 3 months to run. It is besides not wide from the 13F filings whether the hedge money is besides abbreviated Bitcoin oregon has OTM puts connected BTC.

Enemy Of My Enemy Is My Friend Dynamic

Valkyrie, adjacent if with “heroic” intentions, does not marque the concern immoderate easier arsenic they suggest to instrumentality implicit the relation of managing GBTC and trim fees from 2% to 75 ground points. In addition, Valkyrie would usage Reg M. Both would wounded Grayscale’s valuation.

“My sentiment is that Fir Tree is attempting to wounded the probability of a VC rise and propulsion DCG implicit the edge. […] Fir Tree and Valkyrie are unusual bedfellows. Fir Tree is betting against Tether. Valkyrie is positioned arsenic the leader for Bitcoin/GBTC holders. This an ‘enemy of my force is my friend’ dynamic”, Ahluwalia says.

For Bitcoin investors, the unresolved concern astir DCG and Grayscale frankincense remains 1 of the biggest potential risks for further crypto-intrinsic marketplace turmoil. At property time, the BTC terms was astatine $16,624.