During a recent interview, billionaire investor Mike Novogratz shared his latest thoughts on Bitcoin, and in particular he talked about Grayscale Bitcoin Trust (GBTC) and why it is a bad deal for U.S. retail investors in comparison to a Bitcoin ETF.
Former hedge fund manager Novogratz is the Founder and CEO of Galaxy Digital, “a diversified financial services and investment management innovator in the digital asset, cryptocurrency, and blockchain technology sector.”
His comments came during iConnections’ 2021 Global Alternatives Conference, where he had a conversation about Bitcoin with Russell Barlow, Global Head of Alternative Investment Strategies at Aberdeen Standard Investments.
Although Canada has recently approved two Bitcoin ETF, the U.S. SEC still has not approved one (despite proposals by various camps), and for those investors who want a Bitcoin product that they can invest in via tax shelters such as a 401(k) account, until January 15 — when the Osprey Bitcoin Trust (OBTC) became quoted in the OTC market — the only game in town was the Grayscale Bitcoin Trust (GBTC).
However, Novogratz thinks that the U.S. SEC will soon realize that a Bitcoin ETF would be a much better Bitcoin investment vehicle for U.S. retail investors and that it will become very hard for it to resist approvng one:
“The biggest owner of Bitcoin in the world is the Grayscale Trust, right. It’s a closed-end fund run by Barry Silbert’s group. It is a brilliant piece of business. They have $25 billion worth of Bitcoin. They charge 2% annual fee. Plus, they make money on the way trading in. Most of that money comes from people putting Bitcoin in their fund, so borrowing Bitcoin, putting it in their fund, seasoning it for six months, and then getting shares of the trust.
“So if you want to think about it, it’s hedge funds arbitraging retail. That’s what it is. There’s no other way to think about it. So you’re the SEC, you would not let an ETF through, but you let this project through where retail is getting the short end of the stick. Makes absolutely no stinking sense. I cannot believe Gary Gensler will let that go on for that much longer...
“What is I think is going to happen is the SEC is going to allow an ETF, which is better for retail. The ETF is going to drag all the new liquidity and that premium on the Grayscale Trust is going to collapse… I think within the next 12 months.“
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.