Ben Strack

Though Alameda Research had sought to add plaintiffs to its legal fight against Grayscale Investments, it remained the only one listed in an amended complaint filed Friday.



The bankrupt company’s inability to assemble co-plaintiffs means it has modified its claims against the crypto firm — at least for now.



But Alameda is set to continue engaging with shareholders about their willingness to participate in the litigation, a person familiar with the filing told Blockworks. If sufficient shareholders agree, the firm plans to amend the complaint again, they added.&nbsp;&nbsp;



Founded by Sam Bankman-Fried, Alameda is a debtor affiliate of crypto exchange <a href="https://blockworks.co/tag/ftx">FTX</a> that filed for bankruptcy last November. The company <a href="https://blockworks.co/news/alameda-sues-grayscale-dgc-silbert">sued Grayscale in March</a>, claiming that the fee structure and redemption ban on its Bitcoin Trust (GBTC) and Ethereum Trust (ETHE) had lowered the value of Alameda’s shares by 90%.



A Grayscale spokesperson previously told Blockworks the lawsuit is “entirely without merit.” The representative declined to comment on the amended filing Monday.&nbsp;&nbsp;



Alameda, in its original complaints, aimed to get hundreds of millions of dollars in damages and injunctions requiring Grayscale to reduce its annual fee and offer redemptions.



Grayscale had argued that the fee-related claims would only be permitted if shareholders holding 10% of outstanding shares in each trust joined the suit as co-plaintiffs. Alameda was short of the threshold after one unnamed shareholder backed out of joining the litigation, the company said in an Aug. 2 motion to the Delaware Chancery Court.&nbsp;



Alameda said in the filing last month that roughly 45 individuals, funds and family offices indicated they are willing to participate as additional plaintiffs — and <a href="https://blockworks.co/news/alameda-grayscale-lawsuit">asked for more time to assemble them</a>.&nbsp;



The court had given the plaintiff until Sept. 15 to respond to Grayscale’s motion to dismiss, filed in May. But Alameda is still the only plaintiff listed in an amended complaint filed that day.&nbsp;



Law firms Quinn Emanual Urquhart &amp; Sullivan and Abrams &amp; Bayliss, which represent Alameda in this case, declined to comment.



<h2 class="wp-block-heading">Still fighting for GBTC redemptions</h2>



The Sept. 15 complaint notes that Fir Tree Partners, 210K Capital, UTXO, Owl Creek Asset Management, Aristides Capital, and ProChain Capital expressed a willingness to participate in the suit. But “for reasons unrelated to the merits of the claims,” it adds, not enough shareholders came forward “to surmount Grayscale’s asserted 10% threshold.”&nbsp;



“While allegations surrounding the fees remain in the complaint, Alameda has dropped those claims, and the complaint now appears to be centered solely around the request for redemptions,” Bloomberg Intelligence litigation analyst Negisa Balluku told Blockworks. “However, Alameda doesn&#8217;t seem to foreclose the possibility that in the future it may add additional plaintiffs and bring back the sponsor fee claims.”



Despite the changes, the new complaint said it seeks to recover “nine figures in harm” for the benefit of its chapter 11 bankruptcy estate.



“Due to defendants’ bad faith refusal to allow redemptions, shareholders can exit their investments in the trusts only by selling their shares in the secondary market, where shares trade at a fraction of their proportionate interest in trust assets,” it states.&nbsp;



<a href="https://blockworks.co/tag/gbtc">GBTC</a> shares trade on OTC Markets Group’s OTCQX marketplace — and may be bought and sold at a premium or discount to the value of the trust’s underlying bitcoin.&nbsp;



GBTC was trading at a discount of about 19% to its net asset value (NAV) on Friday, according to <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav">YCharts.com</a>. The discount to NAV for ETHE on Friday was roughly 25%.



“Remedying the harm to the Alameda debtor will also unlock over $4 billion in value for over one million other trust shareholders, many of whom are small retail investors that defendants are continuing to exploit,” the amended complaint states.&nbsp;



Grayscale executives have said that converting GBTC to an ETF would solve the problem of the fund’s shares trading at a discount or premium. The trust currently has $16.4 billion in assets under management.



The firm won a lawsuit against the US Securities and Exchange Commission last month. <a href="https://blockworks.co/news/judges-grayscale-sec-ruling">DC Circuit Court of Appeals judges ruled</a> the SEC’s denial of GBTC’s conversion to an ETF — but approval of bitcoin futures ETFs — was “arbitrary and capricious.”



Read more: <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf">What Grayscale’s win against the SEC actually means</a>



Though the decision does not require the <a href="https://blockworks.co/tag/sec">SEC</a> to approve GBTC’s conversion, various industry watchers have said they believe it increases the likelihood that the agency will ultimately approve the move, as well as other proposed <a href="https://blockworks.co/tag/spot-bitcoin-etf">spot bitcoin ETFs</a>.&nbsp;



“Grayscale&#8217;s victory over the SEC that could lead to the launch of its first bitcoin ETF may render Alameda&#8217;s redemption request meaningless,” Balluku wrote in an Aug. 30 research note.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Alameda Research

Alameda amends complaint against Grayscale as co-plaintiff search continues

The court is set to deliver its ruling on Grayscale Investments&#8217; lawsuit against the US Securities and Exchange Commission. Regardless of the outcome, it holds the potential to significantly impact the company&#8217;s flagship bitcoin trust and the discount at which its shares currently trade.



Grayscale sued the SEC in June 2022 after the regulator blocked it from converting its Bitcoin Trust (GBTC) to an ETF. The firm had argued to the DC Circuit Court of Appeals that the SEC’s approval of ETFs investing in bitcoin futures contracts, but not proposed products that would hold bitcoin directly, is “arbitrary and capricious.”



Eligible shares of GBTC — currently with $16.2 billion in assets — are quoted on OTC Markets Group’s <a href="https://www.otcmarkets.com/corporate-services/get-started">OTCQX</a>. Those shares have traded at a premium or discount to the value of bitcoin held by trust as demand for the product fluctuates.



Read more: <a href="https://blockworks.co/news/first-bitcoin-futures-etf-nears-1b-on-first-day-of-trading">First bitcoin futures ETF nears $1B on first day of trading</a>



GBTC was trading at a 26% discount to its net asset value (NAV) on Friday, <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav">according</a> to YCharts.com. It had fallen to just below 24% on Aug. 14 — down about 20 percentage points from roughly 44% on June 13.&nbsp;



“The strong narrowing of it shows how the perceived likelihood of an ETF spot approval in the US in the future strongly increased, pushing investors to buy the GBTC at a strong discount, believing in a future ETF listing,” Fineqia research analyst Matteo Greco said in a Monday research note.&nbsp;



<h2 class="wp-block-heading">What the discount could do after the court ruling</h2>



Chase White, senior research and policy analyst at Compass Point Research &amp; Trading, anticipates that the GBTC discount might &#8220;close significantly&#8221; following a Grayscale victory, perhaps narrowing to as much as 10%.



“However, we don’t think it’ll close entirely because we think in the days [or] weeks following the decision, the market will begin to digest the fact that Grayscale’s win does not mean immediate approval to convert GBTC into an ETF,” he told Blockworks.&nbsp;



Read more: <a href="https://blockworks.co/news/grayscale-win-over-sec-might-not-change-much-industry-watchers-say">Grayscale win over SEC might not change much, industry watchers say</a>



The court will likely require the SEC to re-review Grayscale’s application, forcing the crypto asset manager to re-apply with the regulator. That process could take up to 240 days — a procedure <a href="https://blockworks.co/news/sec-bitcoin-etf-september">other prospective spot bitcoin ETF issuers are in the midst of</a>.&nbsp;



Bloomberg Intelligence analyst James Seyffart said an official announcement and timeline of a GBTC conversion to an ETF would send GBTC to “a near-zero discount.”



The main reason for GBTC’s discount is Grayscale’s inability to simultaneously redeem and issue shares, White explained — allowing the discount to NAV to be arbitraged away in real-time.&nbsp;



“There’s no mechanical reason the discount would disappear entirely before the SEC approves the conversion to an ETF and Grayscale starts actively issuing [and] redeeming shares,” White added. “Also, the threat of an SEC appeal could dampen the positive sentiment once that reality sets in.”



Should the DC Circuit Court of Appeals rule in favor of the SEC, industry watchers said the specifics of the decision will be key.&nbsp;



The court accepting the SEC’s concerns about market manipulation as valid — giving it reign to reject spot bitcoin ETFs — would likely drive a bigger discount than if it ruled Grayscale’s application was “simply deficient” as it currently stands, White said.&nbsp;&nbsp;



GBTC reached a record discount to NAV of nearly 50% in December 2022.&nbsp;



“It wouldn&#8217;t be crazy to see it head in that direction again if Grayscale loses,” Seyffart said.&nbsp;



Greco told Blockworks that while a Grayscale loss would result in many investors selling shares of the trust, he doesn’t expect the discount to return to the 40%-plus level.



<h2 class="wp-block-heading">When will the court make a ruling?</h2>



The DC Circuit Court of Appears ruling is imminent, and some expect it to be very soon.



In fact, Bloomberg Intelligence analyst James Seyffart had predicted the ruling to come on Aug. 15, a date he called “an educated guess.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">8/15 has been my theoretical Grayscale lawsuit decision date for a while now but it’s really just an educated guess. I didn’t even do detailed analysis on the court decisions like <a href="https://twitter.com/SGJohnsson?ref_src=twsrc%5Etfw">@SGJohnsson</a> did. But I did a little bit of it and also had convos with <a href="https://twitter.com/NYCStein?ref_src=twsrc%5Etfw">@NYCStein</a> about timelines&mdash; James Seyffart (@JSeyff) <a href="https://twitter.com/JSeyff/status/1691190095884210176?ref_src=twsrc%5Etfw">August 14, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



On Aug. 10, Scott Johnsson, a general partner at Van Buren Capital, said in a post on X, formerly known as Twitter, that 156 days had passed since the <a href="https://blockworks.co/news/grayscale-appears-to-win-opening-sec">oral arguments in the Grayscale-SEC case</a>. He pointed out that the DC Circuit Court of Appeals delivered rulings for nearly all cases presented in March 2022 within 154 days. The exception, he mentioned, took 170 days for a decision.



He <a href="https://twitter.com/SGJohnsson/status/1691178323399905280">said</a> last week that he expected the court decision to come on a Tuesday or Friday in August, noting those are the two weekdays the court typically publishes its decisions. 



“Why should we expect August?” Johnsson wrote in a separate post on X. “Because law clerks for DC generally cycle in/out this month, so judges aim to clear [the] prior caseload before the new guard arrives.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Grayscale Bitcoin Trust

What the GBTC discount could do with Grayscale-SEC case ruling imminent

The crypto hedge fund founded by Sam Bankman-Fried says it’s in the process of assembling more plaintiffs to join the firm in its suit against Grayscale Investments.&nbsp;



Alameda Research — a debtor affiliate of crypto exchange FTX, which filed for bankruptcy last November — <a href="https://blockworks.co/news/alameda-sues-grayscale-dgc-silbert">sued Grayscale, Digital Currency Group (DCG) and DCG CEO Barry Silbert</a> in March. It claimed at the time that Grayscale’s fee structure and redemption ban on its bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ethereum (<a href="https://blockworks.co/price/eth">ETH</a>) trusts had lowered the value of Alameda’s shares by 90%.



Alameda said in an August 2 motion to the Delaware Chancery Court that more than 45 parties, including individuals, funds and family offices “have already indicated they are willing to participate as additional plaintiffs.”



These individuals and entities were not named in the document.



Law firms Quinn Emanual Urquhart &amp; Sullivan and Abrams &amp; Bayliss, which represent Alameda in this case, did not immediately return a request for comment.&nbsp;&nbsp;



But Alameda requires more time “to continue to assemble plaintiffs to participate alongside it,” the <a href="https://www.docketalarm.com/cases/Delaware_State_Court_of_Chancery/2023-0276/Alameda_Research_Ltd._v._Grayscale_Investments_LLC_et_al/92275839/">motion</a> adds. The court is giving the plaintiff until Sept. 15 to respond to Grayscale’s motion to dismiss.



The lawsuit is “entirely without merit,” a Grayscale spokesperson told Blockworks Thursday, declining to comment further.&nbsp;&nbsp;



Alameda said the shares of the Grayscale Bitcoin Trust (GBTC) and the Grayscale Ethereum Trust (ETHE) were trading at a discount of roughly 50% when it filed the lawsuit — a price about half the value of the bitcoin and ether backing them.



That resulted in a loss in market capitalization of about $9 billion for the two trusts for investors, the FTX debtor said in its March 6 <a href="https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/r8Su_u_Le.wA/v0">complaint</a>



“For the Alameda debtor alone, the discount equates to a loss in the market value of its holdings in the Trusts of over $250 million,” it added.



GBTC was trading at a discount of 25.8% to its net asset value on Wednesday, according to <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav">YCharts.com</a>, while the discount of ETHE stood at roughly 34.2%.&nbsp;&nbsp;



<h2 class="wp-block-heading">In need of more plaintiffs</h2>



The suit came about five months after the collapse of FTX, which, like Alameda Research, was founded by Bankman-Fried. The former FTX CEO was <a href="https://blockworks.co/news/no-bail-for-bankman-fried-leaves-bahamas-court-in-handcuffs">originally charged</a> with wire fraud, conspiracy to commit securities fraud, and other charges in an eight-count indictment — <a href="https://blockworks.co/news/sam-bankman-fried-issues-not-guilty-plea">to which he pleaded not guilty</a>.&nbsp;



Read more: <a href="https://blockworks.co/news/campaign-finance-charges-against-sbf">US prosecutors drop campaign finance charges against SBF</a>



John J. Ray III, which now serves as FTX’s CEO and chief restructuring officer, said in a March statement that it would “use every tool we can to maximize recoveries for FTX customers and creditors.”



Alameda’s effort to assemble more plaintiffs follows Grayscale’s motion to dismiss the case in May.&nbsp;



Grayscale argued that certain claims relating to sponsor fees would only be permitted under the trust agreements if brought by at least two unaffiliated shareholders who jointly own at least 10% of the trusts&#8217; outstanding shares, Bloomberg Intelligence litigation analyst Negisa Balluku said in a Thursday research note.&nbsp;



An unnamed “significant shareholder” of the Grayscale trusts expected to be an additional plaintiff backed out of joining the litigation on July 31, it said in the Aug. 2 document — leaving Alameda short of the 10% shareholder support.&nbsp;



“Even if Alameda eventually secures the necessary shareholder support, its attempt to unlock about $9 billion through a reduction of fees and implementation of a redemption program may still face dismissal,” Balluku wrote.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Alameda looks to rally up co-plaintiffs in case against Grayscale

<div id="highlights-block_62bf684bc45fe" class="highlights">
 <ul>
 <li>Valkyrie CEO said Grayscale&#8217;s suit against the SEC is not likely to succeed</li>
 <li>Osprey Funds leader believes a spot bitcoin ETF will not be approved during SEC Chair Gary Gensler’s administration</li>
 </ul>
 
</div>



Grayscale Investments is crafting its initial arguments against the SEC following the agency’s denial of the company’s bitcoin ETF proposal, although some are unconvinced the decision will be overturned.



“Right now we’re just laser-focused on working with the court, setting up briefing schedules and going from there,” Grayscale Chief Legal Officer Craig Salm told Blockworks. “We think that we have very common-sense and compelling arguments here and we think the court will be able to see that as well.”



<a href="https://cms.blockworks.co/grayscale-sues-sec-over-rejection-of-proposed-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">Grayscale filed</a> a <a href="https://www.docdroid.net/73OjnW4/dc-circuit-petition-for-review-as-filed-pdf" target="_blank" rel="noreferrer noopener">petition for review</a> with the US Court of Appeals for the District of Columbia Circuit Wednesday evening when the SEC rejected the conversion of its bitcoin trust (GBTC) to an ETF.&nbsp;



The firm expects to submit written arguments over the next couple months, Salm said. Grayscale’s attorneys estimate that the suit could take between nine and 12 months at the appellate level.&nbsp;



The company argues the SEC is acting “arbitrarily and capriciously” under the Administrative Procedures Act (APA), Salm said. The agency, he added, is also discriminating against issuers by <a href="https://cms.blockworks.co/proshares-bitcoin-futures-based-etf-to-begin-trading-tuesday/" target="_blank" rel="noreferrer noopener">approving futures-based bitcoin ETFs</a> but denying proposed spot-based bitcoin products.



“Both types of ETFs are priced based on the underlying bitcoin markets, and so if you’re OK with one for an ETF, then you also should be OK with the other,” Salm said Friday. “They’re two like investment vehicles that are just being treated [differently] in this situation.”&nbsp;&nbsp;



<h3 class="wp-block-heading">Will Grayscale win?</h3>



Dave Nadig, financial futurist at VettaFi, told Blockworks that the SEC’s congress-approved mandate gives the agency “extremely clear authority” to regulate rule-making about the activities of securities exchanges.&nbsp;



“I think it’s a very tough case for [Grayscale] to win,” he said. “The SEC explicitly is allowed to approve and deny exchange rules based, essentially, on whatever they like.”



To rule in Grayscale’s favor, Nadig added, the SEC would essentially have to decide that because it allowed derivatives products, it must allow a product focused on the underlying asset.&nbsp;&nbsp;



“This seems pretty stretchy to me,” he said. “By that logic, they’d have to allow all sorts of really unworkable products, like a physical oil product.”



Leah Wald, CEO of Valkyrie Funds, said in <a href="https://twitter.com/LeahWald/status/1542545687228940289" target="_blank" rel="noreferrer noopener">a series of Twitter posts</a> Thursday that suing the SEC is not likely to succeed, noting that regulators could potentially approve a spot<a href="https://twitter.com/hashtag/BTC?src=hashtag_click"> </a>bitcoin ETF before Grayscale’s lawsuit ends.



“Not many people expect this suit to go in favor of Grayscale and there isn’t much precedent for such an outcome to occur,” Wald tweeted. “But in order to keep assets flowing in and ensure institutions remain engaged, this is the only real move they have left.”



The SEC also rejected Bitwise Asset Management’s spot bitcoin ETF application this week.&nbsp; The San Francisco-based company <a href="https://cms.blockworks.co/bitwise-tries-once-more-for-spot-bitcoin-etp/" target="_blank" rel="noreferrer noopener">refiled its proposal last October</a>, attaching roughly 150 pages of research focused on price discovery in the crypto markets.



No spot bitcoin ETF has ever been approved in the US, and a number of industry watchers have said they <a href="https://cms.blockworks.co/crypto-execs-read-the-tea-leaves-on-spot-bitcoin-etf-approval/" target="_blank" rel="noreferrer noopener">do not expect one to launch</a> until 2023 at the earliest.



Greg King, CEO of crypto fund issuer Osprey Funds, said the SEC’s decisions on the Grayscale and Bitwise applications were what he expected.



“We believe the SEC’s concerns around offshore trading of bitcoin have not been sufficiently addressed,” King told Blockworks in an email. “This rejection confirms our belief that no spot bitcoin ETF will be approved in [SEC Chair Gary] Gensler’s administration.”



Gensler’s current five-year term expires in 2026.



Some issuers continue to try to launch a product though, as asset manager VanEck <a href="https://cdn.cboe.com/resources/regulation/rule_filings/pending/2022/SR-CboeBZX-2022-035.pdf" target="_blank" rel="noreferrer noopener">filed</a> a new application for a spot bitcoin ETF. The firm’s previous application for such an offering <a href="https://cms.blockworks.co/sec-rejects-vanecks-proposed-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">was denied</a> last November.&nbsp;



A VanEck spokesperson declined to comment on the filing. 



GBTC had about $12 billion in assets on Friday. The investment vehicle was <a href="https://ycharts.com/companies/GBTC/discount_or_premium_to_nav" target="_blank" rel="noreferrer noopener">trading at a 31% discount</a> to its net asset value (NAV) on Thursday, which was about 2 percentage points more than the day before the SEC’s decision.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

asset management

Grayscale Faces Uphill Battle With Lawsuit Against SEC

<div id="highlights-block_625890c0e5a8b" class="highlights">
 <ul>
 <li>Crypto-focused panels included executives from Grayscale Investments, MicroStrategy, 21Shares, Nasdaq and Valkyrie Investments</li>
 <li>The conference will become even more crypto-centric within three years, a Gemini executive said</li>
 </ul>
 
</div>



Some of the world’s largest asset managers, with little to no interest in crypto, shared the stage with prominent digital asset natives during this week’s Exchange ETF conference in Miami.&nbsp;



The event followed the swarms of bitcoiners — and piggybacking proponents of other cryptocurrencies — that flocked to the streets, clubs and waterways of Miami for <a href="https://b.tc/conference/" target="_blank" rel="noreferrer noopener">Bitcoin 2022</a>.



Pippa Malmgren, a tech entrepreneur and economist, kicked off the conference by calling blue-chip Bored Ape Yacht Club NFTs a “revolution in finance.”&nbsp;



She likened Web3 to a “Windows update,” saying the growth of the metaverse will force traditional financial titans to pay attention.



“You’re just going to be in it — whether you like it or not — because everything you work with is going to get upgraded into that space,” Malmgren said. “It’s a very different creative process that you engage in when you enter these spaces, and that is where we’re going in the world of finance.”



Michael Sonnenshein, chief executive of Grayscale Investments, spoke about the company&#8217;s proposed conversion of its Grayscale Bitcoin Trust (GBTC) to an ETF.



The leader of the largest crypto asset manager — with more than $35 billion in assets under management — <a href="https://cms.blockworks.co/grayscale-ceo-spot-bitcoin-etf-approval-is-the-next-natural-step-for-sec/" target="_blank" rel="noreferrer noopener">doubled down</a> on remarks that “all options would be on the table” if the SEC denied the proposal, including suing the agency.



MicroStrategy CEO Michael Saylor — speaking with Frank Holmes, executive chairman of HIVE Blockchain Technologies — meanwhile, said the US government’s move to regulate digital assets is <a href="https://cms.blockworks.co/michael-saylor-bullish-on-promise-of-crypto-regulation/" target="_blank" rel="noreferrer noopener">“a green light” for the crypto economy</a>. MicroStrategy, the biggest global corporate buyer of bitcoin, now holds about $4 billion of bitcoin.



Valkyrie Chief Investment Officer Steven McClurg and Dave LaValle, Grayscale’s head of ETFs, made their own case for the value of digital assets.



Asked by an attendee why investors should purchase a bitcoin ETF when they can already own the cryptocurrency outright, LaValle said an ETF takes some of the uncertainty or “extraneous education” of owning crypto out of the process.



McClurg added that while it’s important for individuals to own their own crypto, such an investment vehicle is key for professionals to bring exposure to clients.&nbsp;&nbsp;



“We are in a room with a bunch of financial advisors, and if your clients own the coin directly, you can’t get paid,” McClurg said. “The best wrapper for you to put your clients in something like this is either a [separately managed account] or an ETF, because it’s easy.”



<h3 class="wp-block-heading">Off the stage</h3>



More than 2,200 people attended, including nearly 1,000 financial advisers and institutional investors, according to Matt Hougan, chief investment officer of crypto-focused Bitwise Asset Management and a conference co-founder.



ETF providers, index providers, exchanges, trading firms and service providers were among the event’s 124 sponsors, including “a significant number of crypto market participants,” Hougan said.



The booths of the likes of crypto-focused Grayscale, Valkyrie, Bitwise, Gemini and Osprey surrounded the larger, traditional asset managers in one of the Fontainebleau hotel’s largest rooms.



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg" alt="exchange ETF conference Miami" class="wp-image-20136" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/04/Exchange-ETF-conference-1024x576.jpg?w=1600 1600w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /><figcaption>Company booths were set up inside the Fontainebleau hotel in Miami | Source: Ben Strack for Blockworks</figcaption></figure></div>



Next to ARK Invest, which focuses on disruptive innovation, was Vanguard, for example.



A Vanguard spokesperson told Blockworks in January that “the risks of investing in cryptocurrencies are high, and the investment case is weak.”



Financial services titan Fidelity Investments announced during the conference that the crypto economy and metaverse ETFs it <a href="https://cms.blockworks.co/fidelity-plots-crypto-etfs/" target="_blank" rel="noreferrer noopener">had filed for in January</a> are set to launch on April 21.



“These are obviously two topics that are hot and of interest to our clients, and we want to be able to solve their needs,” Greg Friedman, Fidelity’s head of ETF management and strategy, told Blockworks. “Crypto is just another asset class.”



The ETF event’s outdoor oceanside lunch was sponsored by 21Shares, the world’s largest issuer of crypto exchange-traded products and a firm hoping to launch a spot bitcoin ETF in the US with Ark Invest. The firm’s CEO, Hany Rashwan, joined Blockworks reporter Ben Strack on stage Wednesday as part of a panel with Jake Rapaport, Nasdaq’s head of digital asset index research.



The Exchange conference will be a crypto conference within three years, said Dave Abner, global head of business development at crypto exchange and custodian Gemini.



“There’s not that much to talk about with 5 basis point S&amp;P 500 ETFs anymore,” he told Blockworks. “[Crypto] is the stuff that’s interesting. These are the guys that are sponsoring the conference; money’s flowing in that direction.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

21Shares

Crypto and TradFi Collide at Miami ETF Conference

<div id="highlights-block_624cbd01af609" class="highlights">
 <ul>
 <li>Avalanche and Polkadot join BTC, ETH and six other tokens in the digital currency asset manager’s $480 million Digital Large Cap Fund</li>
 <li>Grayscale had added 25 assets to its list of investments under consideration in January</li>
 </ul>
 
</div>



Grayscale Investments is adding three cryptoassets across its three diversified funds and removing two others from the products as part of a quarterly rebalance.&nbsp;



The asset manager’s Digital Large Cap Fund has bought Avalanche (AVAX) and Polkadot (DOT), the firm told Blockworks. No tokens were removed from the fund.



The fund, which launched in 2018 and has $480 million assets under management, enables investors to gain exposure to the upper 70% of the digital currency market.



AVAX and DOT each have market capitalizations above $24 billion, according to data compiled by Blockworks — ranking 10th and 11th, respectively.&nbsp;



The two cryptoassets join bitcoin (BTC), ether (ETH), solana (SOL), cardano (ADA), uniswap (UNI), chainlink (LINK), litecoin (LTC) and bitcoin cash (BCH) in the fund. Combined, AVAX and DOT’s allocation in the fund is about 3.3%.



Grayscale has also added Cosmos (ATOM) to its Smart Contract Platform Ex-Ethereum Fund. No assets were removed as a result of the rebalancing.&nbsp;



ATOM has a market cap of roughly $8.6 billion, which is the 23rd highest among crypto tokens, ahead of LINK and behind LTC. 



The investment vehicle, which offers investors the chance to bet on Ethereum’s largest competitors, <a href="https://cms.blockworks.co/grayscales-latest-fund-focuses-on-smart-contract-platforms/" target="_blank" rel="noreferrer noopener">launched last month</a>. The index-tracking fund’s original holdings were ADA, SOL, AVAX, DOT, Polygon (MATIC), Algorand (ALGO) and Stellar Lumens (XLM). ATOM now makes up roughly 5% of the Grayscale DeFi Fund.



Though no tokens were added to Grayscale’s DeFi Fund, two were removed.&nbsp;



Both SushiSwap (SUSHI) and Synthetix (SNX) were omitted from the fund after failing to meet the market capitalization requirements, according to a Grayscale spokesperson.&nbsp;



SNX’s market cap is slightly less than $1.4 billion, according to data compiled by Blockworks. SUSHI’s market cap is roughly $800 million.



The DeFi fund launched last July and has about $8 million in assets. Cryptoassets remaining in the fund are UNI, Aave (AAVE), Curve (CRV), MakerDAO (MKR), Amp (AMP), Yearn Finance (YFI) and Compound (COMP).



Grayscale added 25 assets to <a href="https://cms.blockworks.co/grayscale-considers-25-new-digital-assets/" target="_blank" rel="noreferrer noopener">a running list of investments</a> it is considering making available to investors in January. Though AVAX and DOT were previously on the list, ATOM was added at that time.



The firm continues to update the list as the digital asset ecosystem expands and it reviews more assets, Grayscale said at the time.



“The process of creating an investment product similar to the ones we already offer is a complex, multifaceted process,” the company said in a statement. “It requires significant review and consideration and is subject to our internal controls, custody arrangements, and regulatory considerations, among other things.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

ATOM

Grayscale Adjusts Cryptoassets Exposure in Diversified Funds

<div id="highlights-block_62399984f5576" class="highlights">
 <ul>
 <li>The fund’s top holdings are Cardano and Solana</li>
 <li>Grayscale’s investors are “not looking to pick winners,” CEO Michael Sonnenshein says</li>
 </ul>
 
</div>



Grayscale Investments has launched a fund that allows investors to bet on Ethereum’s largest competitors in the smart contract space.



The Grayscale Smart Contract Platform ex Ethereum Fund is a market capitalization-weighted portfolio that tracks the CoinDesk Smart Contract Platform Select Ex ETH Index.



Smart contracts are programs run on blockchains that automatically carry out their coded functions when certain conditions are met. They allow users to move funds, create decentralized finance (DeFi) applications and represent the ownership of non-fungible tokens (NFTs).



The fund’s top holdings, as of March 16, were Cardano (ADA) and Solana (SOL), each at roughly 24%. Avalanche (AVAX) and Polkadot (DOT) account for about 17% and 16%, respectively, of the portfolio. The fund also allocates to Polygon (MATIC), Algorand (ALGO) and Stellar (XLM).



Grayscale CEO Michael Sonnenshein called the smart contract platform ecosystem an “emerging area” within crypto.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Our investors continue to seek diversification within their crypto holdings,” he told Blockworks. “They’re not looking to pick winners and prefer seamless access through a diversified product structure.”</blockquote>



Though many investors allocated to Ethereum amid its growth over the past year, there is demand for other smart contract platforms too, according to CoinDesk Indices Managing Director Jodie Gunzberg.



Ethereum’s market capitalization is about $350 billion. Its price, as of 8 am ET on Tuesday, was about $3,020, according to <a href="https://cms.blockworks.co/prices/" target="_blank" rel="noreferrer noopener">data compiled by Blockworks</a> — up 68.6% from a year ago. 



ADA and SOL have market caps currently hovering around $30 billion.



Currently, at $0.95, ADA’s price is down 19.7% in the past year. SOL’s price has risen 542% from a year ago to $91.90.



The new fund is open for daily subscription by eligible individuals and institutional accredited investors and has a 2.5% annual fee.



Grayscale now has 18 investment products, three of which are diversified offerings. As the world’s largest digital currency asset manager, Grayscale managed nearly $40 billion in assets as of March 18.



Sonnenshein said Grayscale is constantly evaluating new protocols to include in the firm’s product family to meet demand.



In January, the company <a href="https://cms.blockworks.co/grayscale-considers-25-new-digital-assets/" target="_blank" rel="noreferrer noopener">added 25 assets</a> to a list of investments it is considering making available to investors. The announcement follows the firm’s <a href="https://cms.blockworks.co/grayscale-launches-first-etf/" target="_blank" rel="noreferrer noopener">launch of its first ETF</a>, the Grayscale Future of Finance ETF (GFOF), last month. The fund, which carries an expense ratio of 70 basis points, has $14 million in assets.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Grayscale Investments

Newsletter

Blockworks Research