The pressure continues to mount on Grayscale with its Bitcoin Trust (GBTC) and parent company Digital Currency Group. And as Ram Ahluwalia, CEO and co-founder of crypto-native investment advisor Lumida, pointed out in a recent thread, two new characters, Valkyrie Investments and Fir Tree have entered the “Shakespearean drama.”
The motivation of the second, in particular, is very dubious. Fir Tree is a hedge fund with about $3 billion in assets under management (AUM) and hundreds of holdings. The SEC 13F filings show that Fir Tree holds First Citizen’s Bank, KKR, Comcast, and hundreds of other securities. They are also large investors in oil and tobacco.
Ahluwalia, therefore, raises the question of why Fir Tree, as a value investor, has an interest in GBTC and filed a lawsuit against Grayscale in early December, especially since the hedge fund does not own a lot of GBTC.
Fir Tree Capital Management filed the lawsuit seeking information that could be used to force changes to the way the company operates its flagship Bitcoin Trust.
The lawsuit seeks Grayscale to lower its fees, initiate redemptions, and release documents related to its relationship with Digital Currency Group. In addition, Fir Tree also seeks to stop Grayscale’s efforts to convert its Grayscale Bitcoin Trust (GBTC) into a spot exchange-traded fund (ETF).
A Big Short On Bitcoin, Crypto, And Tether?
Ahluwalia hypothesizes that the arguments made in the lawsuit do not reflect their true motivation. Fir Tree claims the motivation lies with the “end investors” such as “teachers, firefighters, police officers, and other public officials” who own GBTC.
“There’s a bigger story here…Be skeptical,” says Ahluwalia, explaining, “Fir Tree is making a bigger bet against the crypto ecosystem (USDT, Bitcoin, etc.) and pushing on all the softpoints it can find.”
In this regard, the Chartered Financial Analyst (CFA) refers to Bloomberg’s revelation that Fir Tree took a large short position on Tether (USDT) in March 2022. Fir Tree is betting on a break of the USD/USDT peg, to some extent a “bank run” by March 2023.
The position has been structured as an “asymmetric trade,” meaning that downside risk is low and potential reward is high, with the official rationale for the trade being that “much” of the commercial paper backing the token is tied to Chinese real estate developers, some of which are in trouble.
Further, the analyst asserts that Fir Tree has…
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