Will Grayscale be the next FTX?
On November 18, Grayscale, the asset manager that runs the largest Bitcoin (BTC) fund in the world, issued a statement detailing the security of its digital asset products and confirming that it will no longer share proof of reserves with clients.
“Due to recent events, investors are looking deeper into their cryptocurrency investments,” the statement began, mildly following the FTX crash and investigation into Sam Bankman-Fried’s questionable leadership. In no time, the question on everyone’s lips became clear. Will Grayscale be next?
The answer is that it is not likely. This is largely because the people at the top, who make Grayscale what it is, appear to be more efficient than Sam Bankman-Fried was.
Let’s look at the facts.
It is true and perhaps undeniable that the cryptocurrency industry will deepen again if Grayscale does not repair its balance sheet. The space simply cannot afford another crash, not so soon after FTX and not after such a major player. Grayscale oversees more than $10 billion in BTC, Ether (ETH) and other assets and represents the parent company’s largest source of revenue.
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Grayscale’s parent company — the same one that owns trading company Genesis, mining company Foundry, crypto investment app Luno, and media outlet CoinDesk, among others — is Digital Currency Group, whose founder and CEO Barry Silbert shared a note to DCG shareholders on Nov. 23. . Address all the “noise” surrounding the company. He noted that despite the so-called crypto winter, the company was on track to reach $800 million in revenue and that its separate entities were “business as usual.”
“We have weathered previous crypto winters, and while this may sound riskier, we will collectively emerge from it stronger,” the CEO’s note read.
Silbert is an early Bitcoin evangelist and a true cryptocurrency enthusiast. But, unlike Sam Bankman-Fried, he has 28 years of experience under his belt. Before he discovered cryptocurrency, he used to be an investment banker in New York and was the CEO of stock trading platform Second Market, which he sold to Nasdaq in 2015. In other words, this isn’t his first rodeo.
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Silbert, along with Grayscale’s own leadership, waged a parallel battle with the US Securities and Exchange Commission after regulators denied her request to convert the Grayscale Bitcoin Trust (GBTC) into a Bitcoin spot exchange fund (ETF), the first in the US. The SEC did this on the grounds that the investment manager “failed to answer questions about concerns about market manipulation” and poor investment protection, but you could also make the argument that had they accepted the bid, cryptocurrency would have had an opportunity to “open up.” More institutional investment” and perhaps avoid the current downturn we are experiencing.
Grayscale then filed a petition challenging the decision with the US Court of Appeals for the District of Columbia and went on to sue the watchdog for what it called an “arbitrary, capricious, and discriminatory” ruling.
In other words: For anyone who cares about the future of cryptocurrency and believes in the importance of regulators acting in good faith to move the industry forward, Grayscale is putting up a good fight.
Grayscale’s November 18 statement noted that “the panic created by others is not reason enough to circumvent the complex security arrangements that have kept our investors’ assets safe for years.” They have proven their value and reputation through a decade long track record of continuous growth. This is unlikely to change anytime soon.
Daniel Servadi He is the co-founder and CEO of Sellix, an e-commerce platform based in Italy.
This article is for general information purposes and is not intended and should not be considered legal or investment advice. The views, ideas and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.