SOL price risks 20% drop despite Grayscale Solana Trust’s retail debut

April 17, 2023 Coin Telegraph

The latest Solana rally has had it return to the resistance range that prompted 25-40% price pullbacks multiple times this year.

On April 17, the price of Solana (SOL) crept lower in the wake of similar price moves across the top-ranking cryptocurrencies, including Bitcoin (BTC) and Ether (ETH).

SOL's price dropped over 4% under $24.50 despite rising to $26 — a two-month high — earlier in the day.

In comparison, BTC's and ETH's prices dropped 3.5% and 3%, respectively, hinting at a bearish start to the week.

*SOL/USD hourly price chart. Source: TradingView*

SOL price in a technical correction

The SOL/USD selloff on April 17 started after it entered its 2023 resistance range.

Notably, the $25-27 price area has capped Solana's upside attempts since January 2023. Testing it as resistance has preceded 25-40% corrections on multiple occasions this years, as illustrated below.

*SOL/USD daily price chart. Source: TradingView*

The possibility of undergoing a sharp bearish reversal in April has now increased as SOL's price returns into the range and its daily relative strength index (RSI) hangs around the overbought threshold of 70.

In this bear scenario, the immediate downside target appears to be around $20, about 20% lower than the current prices.

Conversely, a decisive breakout above the $25-27 price range could have SOL price climb toward $30, which served as support in August-October 2022.

Such a breakout could extend until $35 over the next few months, and this level coincides with SOL's 50-week exponential moving average (the red wave in the chart below).

*SOL/USD weekly price chart. Source: TradingView*

Grayscale Solana Trust goes public

On April 17, U.S.-based Grayscale Investments announced that its Grayscale Solana Trust has begun trading on OTC Markets under the symbol: GSOL.

To recap: the Grayscale Solana Trust is a security that derives its value from the SOL's spot price. In doing so, the trust enables investors to gain exposure in the Solana market while avoiding the challenges of buying, storing, and safekeeping SOL directly.

Interestingly, SOL's price dropped by up to 4.40% after the announcement, suggesting traders likely "sold the news" of an institutional Solana investment product going public.

One reason for the bearish debut for GSOL is the current state of Grayscale Trusts on the whole. Notably, they act like closed-end funds, meaning Grayscale cannot issue new shares or remove shares from the open market to adjust to capital inflow or outflow.

As a result, the share price of the Solana Trust can deviate from the net asset value. This could spook investors in a bear market when their GSOL starts trading at a discount versus the value of Grayscale's SOL reserves, similar to the Grayscale Bitcoin Trust (GBTC).

As of April 17, Grayscale Solana Trust's holdings per share were up around 148% YTD stemming from identical gains in SOL/USD.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Cathie Wood: Ark dumps 500K GBTC shares, adds Coinbase stock as Bitcoin recovers 40%

January 23, 2023 Coin Telegraph

Ark Invest

Ark's GBTC weight in the portfolio actually increased despite the fund selling 500,000 shares in the past month.

Cathie Wood's Ark Invest offloaded a chunk of its Grayscale Bitcoin Trust (GBTC) shares since November's Bitcoin (BTC) price lows, the latest data shows.

Cathie Wood's Ark short-term cautious on GBTC

Ark Invest added 450,272 GBTC shares worth $4.5 million to its ARK Next Generation Internet ETF (ARKW) in November 2022. At the time, GBTC was trading in the $7.46-$9.48 range versus $12.25 in January 2023.

GBTC price, of course, recovered alongside Bitcoin, rising roughly 40% from its November lows. The recovery in January also helped reduce the GBTC "discount" from nearly 50% to 40%, according to YCharts.

*GBTC daily price chart. Source: TradingView*

Interestingly, the share price rebound coincided with a reduction in ARKW's GBTC holdings by 500,000 shares, suggesting profit taking in the short ter.

*GBTC shares (purple) in Ark's ETF versus its price (orange). Source: Cathiesark.com*

Moreover, Ark's reduction in shares since November appears in line with its officially "bearish view" on the Grayscale Bitcoin Trust, as mentioned in its December report, which stated that:

"The Digital Currency Group (DCG) appears to be one of the biggest questions marks in the crypto industry at this time."

The company also expressed concerns about Genesis Global, a cryptocurrency lender owned by DCG. Genesis filed for bankruptcy while claiming $1 billion to $10 billion in liabilities to over 100,000 creditors.

Meanwhile, Grayscale has been unable to convert its Bitcoin trust into an ETF following rejections from the U.S. Securities and Exchange Commission (SEC). As Cointelegraph reported, an approval from the SEC could reset GBTC's discount to zero.

Nonetheless, as of Jan. 23, GBTC's share weight in Ark's portfolio has actually increased to 0.52% compared to its November 2022 low of 0.35%.

*GBTC shares' weight (purple) across Ark ETFs. Source: Cathiesark.com*

Ark adds $17.6M in Coinbase stock

Ark's selling of GBTC shares in the past weeks coincided with accumulation of Coinbase (COIN) shares.

Cathie Wood's ARKW added 320,000 COIN shares (about $17.6 million) in 2023. As a result, the Coinbase stock's weight in Ark Invest's combined ETF portfolios has reached nearly 3.62% on Jan. 23 versus 2.73% at the start of this year.

*COIN shares (purple) in Ark's ETF versus its price (orange). Source: Cathiesark.com*

Overall, Ark appears to be only increasing its exposure to the Bitcoin market, particularly as Wood is well known for her consistent $1 million BTC price prediction by 2030.

Can the GBTC price rally continue?

Similarly, Greenery Financial, an investment strategy firm, confirmed that it had shifted its GBTC exposure to ProShares Bitcoin Strategy ETF (BITO) due to the above-mentioned risks around DCG.

"Any bad news, be it Cathie Wood selling out of GBTC or DCG going bankrupt, will spark the same fears and doubt - of uncertainty - and likely cause an expansion of the discount once again," the firm warned in its SeekingAlpha note, saying:

"With Bitcoin having no real catalyst in the short term and plenty of potential downside catalysts, there are plenty of risks here from the NAV side as well."

Nonetheless Bitcoin and GBTC prices may keep on rallying through Q1 from a technical perspective.

On the daily chart, GBTC has reclaimed its 50-day exponential moving average (50-day EMA; the red wave in the chart below) near $9.68 as support.

Upward momentum could see it test the 200-day EMA (the blue wave) near $15 if it continues to float above the 50-day EMA wave, similar to what happened in March-April 2022.

The technical upside target falls in line with what Pat Tschosik, senior portfolio strategist at Ned Davis Research, predicts about the Grayscale Bitcoin Trust.

He argues that GBTC price could not only double by mid-2023, but also narrow the extant discount gap with Bitcoin's spot price.

“We recommend GBTC…as a way to play Bitcoin because it has a ‘potential NAV kicker rebate,’ which not only means it would go up if Bitcoin goes up, but also closing its current large 35% rebate on NAV,” Ned Davis Research said in a note to clients.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Fir Tree fund sues Grayscale in effort to force changes to Bitcoin Trust

December 7, 2022 Coin Telegraph

Coin Telegraph

The New York-based hedge funds want Grayscale to cough up information about its flagship Bitcoin trust which it believes could reveal potential mismanagement.

Fir Tree Capital Management has filed a lawsuit against Grayscale Investments demanding information that could be used to force changes to the way it runs its flagship Bitcoin Trust.

According to Bloomberg, a Dec. 6 complaint was filed against Grayscale at the Delaware Court of Chancery and seeks to have Grayscale lower its fees, start redemptions and hand over documents relating to its relationship with the Digital Currency Group.

The hedge fund also wants to stop Grayscale’s efforts in converting its $10.7 billion Grayscale Bitcoin Trust (GBTC) into a spot exchange-traded fund (ETF).

In its complaint, the New York-based hedge fund said that around 850,000 retail investors had been “harmed by Grayscale’s shareholder-unfriendly actions.”

Shares in Grayscale’s Bitcoin trust currently trade at a near record 43% discount to the Net Asset Value (NAV) of its underlying digital asset, Bitcoin, according to data from Ycharts.

Much of the reason is due to the fact that GBTC holders have little to no means to exit their GBTC positions, except to sell them to another market participant as it does not offer a redemption program into fiat or crypto.

Fir Tree alleges Grayscale’s redemption bar, which dates back to 2014, is “self-imposed,” and claims Grayscale is refusing to redeem shares as that would cut into profits.

The firm also wants Grayscale to stop trying to convert the trust into an ETF which it has tried to do repeatedly over a number of years without success.

“That strategy will likely cost years of litigation, millions of dollars in legal fees, countless hours of lost management time, and goodwill with regulators,” Fir Tree’s lawyers said in the complaint. “All the while, Grayscale will continue to collect fees from the trust’s dwindling assets.”

However, Grayscale has maintained that the funds’ conversion into an ETF is what will allow it to create and redeem shares.

A Grayscale spokesperson told Cointelegraph it has always planned to convert the GBTC into an ETF when permitted by United States regulators.

“We remain 100% committed to converting GBTC to an ETF, as we strongly believe this is the best long-term product structure for GBTC and its shareholders.”

“At Grayscale, our mission is to help investors access the ever-evolving crypto ecosystem through familiar, secure, and transparent investment vehicles. We respect the views of our shareholders, and appreciate engaging directly with them on the details of our product structures and operating model.”

The gap between GBTC shares and Bitcoin increased to nearly 50% in the weeks after the collapse of the now-bankrupt crypto exchange FTX.

Shares in GBTC have been gradually declining for almost a year since its peak position of $51.47 per share on Nov. 12, 2021, with the price per share standing at $8.76 at the time of writing, as per Yahoo Finance.

GBTC Manager Insists the ‘Holdings of Grayscale’s Digital Asset Products Are Safe and Secure’

November 19, 2022 Bitcoin.com

The biggest Bitcoin fund just hit a record -35% discount — A warning for BTC price?

September 24, 2022 Coin Telegraph

Bitcoin

Institutional interest in Grayscale Bitcoin Trust continues to dwindle 10 months into the crypto bear market.

Grayscale Bitcoin Trust (GBTC), a cryptocurrency fund that currently holds 3.12% of the total Bitcoin (BTC) supply, or over 640,000 BTC, is trading at a record discount compared to the value of its underlying assets.

Institutional interest in Grayscale dries up

On Sep. 23, the $12.55 billion closed-end trust was trading at a 35.18% discount, according to the latest data.

*GBTC discount versus spot BTC/USD price. Source: YCharts*

To investors, GBTC has long served as a great alternative to gain exposure in the Bitcoin market despite its 2% annual management fee. This is primarily because GBTC is easier to hold for institutional investors because it can be managed via a brokerage account.

For most of its existence, GBTC traded at a hefty premium to spot Bitcoin prices. But It started trading at a discount after the debut of the first North American Bitcoin exchange-traded fund (ETF) in Canada in February 2021.

Unlike an ETF, the Grayscale Bitcoin Trust does not have a redemption mechanism. In other words, GBTC shares cannot be destroyed or created based on fluctuating demand, which explains its heavily discounted prices compared to spot Bitcoin.

Grayscale's efforts to convert its trust into ETF failed after the Securities and Exchange Commission's (SEC) rejection in June. In theory, SEC's approval could have reset GBTC's discount from current levels to zero, churning out profits for those who purchased the shares at cheaper rates.

Grayscale sued the SEC over its ETF application rejection. But realistically, it could take years for the court to give a verdict, meaning investors would remain stuck with their discounted GBTC shares, whose value have fallen by more than 80% from their November 2021 peak of around $55.

Also, GBTC's 12-month adjusted Sharpe Ratio has dropped to -0.78, which shows that the anticipated return from the share is relatively low compared to its significantly high volatility.

*GBTC 12-month adjusted Sharpe Ratio. Source: PortfolioSlab.com*

Simply put, institutional interest in Grayscale Bitcoin Trust is drying up.

A warning for spot Bitcoin price?

Grayscale is the world's largest passive Bitcoin investment vehicle by assets under management. But it doesn't necessarily enjoy a strong influence on the spot BTC market after the emergence of rival ETF vehicles.

For instance, crypto investment funds have attracted a combined total of almost $414 million in 2022, according to the CoinShares' weekly report. In contrast, Grayscale has witnessed outflows of $37 million, which include its Bitcoin, Ethereum, and other tokens' trusts.

*Fund flows by provider. Source: CoinShares*

Instead, day-to-day fluctuations in the spot Bitcoin price are heavily driven by macro factors, at least for the time being.

*NDAQ versus BTC/USD daily price chart. Source: TradingView*

A stronger U.S. dollar also hurts Bitcoin's upside prospects, given their consistent negative correlation over the past year in a higher interest rate environment.

For instance, the U.S. dollar index (DXY), which measures the greenback's strength against a basket of top foreign currencies, has climbed over 113, its 20-year high, on Sep. 23. Similarly, yields on 2-year and 10-year U.S. Treasury notes have climbed to 4.21% and 3.69%, respectively.

*U.S. dollar index versus US 10-year and US 2-year Treasury yields. Source: TradingView*

Several on-chain metrics, however, are suggesting that Bitcoin could bottom out soon based on historical data. However, from a technical standpoint, BTC's price still risks a drop toward the $14,000-$16,000 area, according to independent analyst il Capo of Crypto.

*BTC/USD eight-hour price chart. Source: TradingView/Capo of Crypto*

Its more likely that [Bitcoin] will reject at the first resistance of 20300-20600," he said while citing the chart above, adding:

"Wait for the bounce, then exit all the markets."

Other Bitcoin analysts have thrown around even lower targets such as $10,000–$11,000, due to this being a historical high-volume range.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bankrupt Celsius Lost Users’ Funds Trading Bitcoin (BTC) at CEO Alex Mashinsky’s Request: Report

August 16, 2022 The Daily Hodl

Grayscale Files Lawsuit Against SEC Over Spot Bitcoin ETF Rejection

June 30, 2022 Bitcoin.com

SEC Risks Violating Admin Procedure Act by Rejecting Spot Bitcoin ETFs, Says Grayscale

April 18, 2022 Bitcoin.com

Institutions increase exposure to Grayscale Bitcoin Trust as GBTC discount nears 30%

March 6, 2022 Coin Telegraph

bitcoin trading

More capital enters the flagship Grayscale trust as it eyes regulator approval to become an exchange-traded fund later this year.

Institutional investors are returning to accumulate Grayscale Bitcoin Trust (GBTC) shares as the discount to spot price his risen to nearly 30%, data on Glassnode shows.

Since December 2021, some weekly sessions saw investors pouring in between $10 million and $120 million into Grayscale's flagship fund. Meanwhile, the biggest capital inflow — amounting to nearly $140 million — appeared in the week ending on Feb. 25, as shown in the chart below.

*Institutional Grayscale Investments since September 2021. Source: Glassnode*

No selloff yet among high-profile GBTC backers

The GBTC trust attracted investments as global markets faced back-to-back shocks in the past few months, including a dramatic selloff in the technology stocks, followed by Russia's invasion of Ukraine that left many fund managers with a double-digit percentage loss.

For instance, Cathie Wood's ARK Next Generation ETF (ARKW), which holds $478 million worth of GBTC, crashed by nearly 45% year-over-year, primarily owing to its exposure in the sectors that suffered the most during the recent market turbulence, including technology (43.14%) and communication (27.99%).

*ARKW weekly price chart. Source: TradingView*

But in November 2021, ARKW added over 450,000 GBTC shares to its portfolio, when their discounts were as steep as nearly 17.5%.

Similarly, the Morgan Stanley Insight Fund (CPODX) held over 1.5 million GBTC as of Sep. 30, 2021, according to its securities filings with the U.S. Securities and Exchange Commission (SEC). Its year-over-year performance as of March 6, 2022, came to be around minus 43%.

Both ARKW and CPODX underperformed as GBTC fell by 43% in the past 12 months. Nonetheless, neither ARKW nor CPODX reported selling significant shares of GBTC.

*Institutional Grayscale Investments. Source: Swissblock Technologies, Glassnode*

ETF hype?

Many factors attribute to GBTC's underperformance, including rising competition from exchange-traded funds (ETF) in Canada. Unlike GBTC, ETFs allow investors for Share Redemptions, a process through which a fund can destroy shares based on demand-supply dynamics.

Digital Currency Group, Grayscale's parent company, has attempted to reduce the discount by buying back GBTC shares. But its efforts have been mired further by the launch of ProShares Bitcoin Strategy ETF (BITO), which holds futures contracts. This has ended up dislocating GBTC's price further away from Bitcoin's spot price.

*Grayscale Bitcoin Trust's discount/premium to net asset value. Source: YCharts*

Now, Grayscale has been working on a discount killer switch, through its attempts to convert GBTC from a trust fund to an ETF tied to Bitcoin's price. If the SEC approves Grayscale's application, it would prompt the GBTC discount to reset from its current discount levels to zero.

Nonetheless, the SEC has not approved a single spot Bitcoin ETF application citing risks relates to price manipulation. In comparison, regulators in Canada and Europe have been more welcoming to physical Bitcoin-backed investment products.

Investment management firm Investor Trip asserted that the SEC would eventually approve the spot ETF "due to pressure from 3rd party supporters."

"If approved, Grayscale will convert the trust into a Spot ETF and the discount opportunity will no longer exist," it wrote in its analysis published Feb. 14.

Conversely, analysts at Conservative Income Portfolio called GBTC an investment that is "destined for zero," noting that its discount of net-asset-value of Bitcoin "is not really relevant."

"It might be relevant from a shorter term bounce perspective as a measure of sentiment."

Bitcoin Treasuries List Claims 59 Companies and a Handful of Countries Hold 1.49 Million BTC

December 31, 2021 Bitcoin.com

Grayscale Bitcoin Trust