What Bitcoin Did with Peter McCormack - Grayscale, the SEC & Genesis with Michael Sonnenshein

Grayscale, the SEC & Genesis with Michael Sonnenshein

What Bitcoin Did with Peter McCormack

“A lot of regulators all around the world are looking to see how US regulators treat Bitcoin…I would say that anybody who is broadly involved in the crypto space, you want to see Grayscale win this lawsuit.”
— Michael Sonnenshein

Michael Sonnenshein is the CEO of Grayscale. In this interview, we discuss Grayscale’s lawsuit with the SEC, Genesis’s lending practices and bankruptcy, GBTC and the intercompany relationships at DCG.

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The Grayscale Bitcoin Trust (GBTC) brought institutional investment into Bitcoin and helped Bitcoin to mature. Launched in 2013, as a subsidiary of the Digital Currency Group (DCG), it was devised as an official means of gaining exposure to Bitcoin for high-net-worth entities. Many, including Grayscale, have sought to provide a spot price ETF, but, in the absence of SEC approval, GBTC has served as an attractive alternative investment vehicle. In November 2021, GBTC had over $43 billion AUM.

GBTC is one of many funds Grayscale provides covering a plethora of digital assets, including Ethereum, Solana, Zcash and Bitcoin Cash. However, GBTC is the most dominant: at this moment GBTC represents nearly 75% of Grayscale's total AUM. With its 2% annual fee based on Bitcoin’s spot price, GBTC is a valuable part of Grayscale and DCG's portfolio. At the current Bitcoin price, GBTC commands approximately $420m in fees.

Grayscale is currently dealing with some major issues. Since early 2021 GBTC has been trading below its net asset value (NAV). This discount is currently hovering around all-time lows at 46%. GBTC holders cannot redeem their shares for the underlying asset. They have to sell their shares in an open market and shoulder this discount. Those not forced to sell feel effectively trapped.

Grayscale is subject to a number of investor lawsuits, and an activist campaign seeking to unseat Grayscale as the manager of GBTC. Concurrently, Grayscale is suing the SEC over the latter's refusal to convert GBTC into an ETF. The mechanisms of an ETF allow for arbitrage trading keeping the share price aligned with NAV. This is Grayscale’s strategy for reducing the current GBTC discount.

Grayscale has also been caught up in the bankruptcy of the crypto lending firm Genesis, another subsidiary of DCG. According to a Financial Times report, DCG is selling shares in Grayscale funds, “at a steep discount” to pay back Genesis creditors. There are more fundamental questions about the role of Genesis’s lending. According to Bitcoinist, the failed hedge fund Three Arrows Capital took a $2.36 billion loan from Genesis backed by 17 million GBTC shares.

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@petar

250,000 sats

16 Mar

Peter is going to need a bigger pair of trousers with balls this big, ...seriously wow!

@marks

50,000 sats

28 Feb

thank you for performing a strong interview

@peteypoo

30,000 sats

25 Feb

Big respect for doing this. It sounds like Peter and the team are really taking their viewers experiences to heart. I'm very glad to see such hard questioning put forward to people like Michael who have a clear role in the shit that happens throughout crypto.

@vmvd1898

2,100 sats

16 Mar

⚡️

@daumebtb

1,000 sats

25 Feb

Well done Peter. He certainly looked like he wouldn't take it to his heart but you did the right thing!

@sartoshi

1,000 sats

24 Feb

He knows.

@andyflattery

500 sats

25 Feb

I didn’t think that highly of grayscale but thought Barry would be at least a little compelling

@dputts

500 sats

26 Feb

thank you for having the uncomfortable conversation

@orangepillapp

500 sats

27 Feb

best WBD episode by far. 🔥

@maksimus

500 sats

24 Feb

Great Interview

@semioclasm

500 sats

26 Feb

Second time listening to this banger. This time round I was very aware of how brilliantly obsequious and sycophantic Peter was at the start. It led to Michael being expansive and rather boastful about just how significant and important he was to the activities of the business. Then the hammer drops. Brutal.

@josephjoeyjoe

210 sats

16 Mar

this fool is slimy

@blizzah

200 sats

25 Feb

value 4 value

@fomomatronic

101 sats

25 Feb

hillarious

@stupleb

100 sats

24 Feb

well done here

@rtroitino

100 sats

25 Feb

Thanks for giving this guy the hard time he deserved

@aphex3k

100 sats

27 Feb

Sonnenschein is giving me Machinsky and Fried vibes

@sat_nakamoto

100 sats

25 Feb

credit, where credits due. Peter doing proper journalism.

@piez

100 sats

25 Feb

Peter you crushed this! best hard hitting, honestinterview I’ve ever heard since I got into Bitcoin!

@ruintheory

100 sats

25 Feb

Big Balls on you Pete. Love to hear you push on the issue. Grayscale’s position in these cases is literally the same as politicians with FTX funny money.

@al_al_kool_j

100 sats

3 Mar

atta boy Pete.

@yewteehecksoe

100 sats

25 Feb

GBTC is still the best way to get Bitcoin exposure in certain types of retirement and education savings account. Good on ya for pushing Michael to consider what, if any, moral responsibility he may have regarding the Genesis Bankruptcy.

@nanomoto

16 Mar

mstr

@btclibertarian

100 sats

15 Mar

Great podcast and Peter kept him honest. I hope the SEC suit wins for them. But they were doing shady stuff. Hopefully the industry can innovate around multisig escrows and attest to assets .