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In a letter posted on its website, crypto asset manager Valkyrie Investments has revealed that it wants to become the sponsor and manager of the Grayscale Bitcoin Trust (GBTC), a product introduced by its rival firm Grayscale Investments. It included a set of proposals on how it intends to manage the product, which includes allowing investors to redeem GBTC at net-asset value via a Regulation M filing. Parts of the letter posted on the firm’s website reads as follows, “We are well-equipped to handle the unique challenges and opportunities presented by GBTC. Our combination of technical and regulatory knowledge and hands-on experience makes us the ideal choice to take on this role […] We understand that Grayscale has played an important role in the development and growth of the bitcoin ecosystem with the launch of GBTC, and we respect the team and the work that they have done. However, in light of recent events involving Grayscale and its family of affiliated companies, it is time for a change. Valkyrie is the best company to manage GBTC to ensure its investors are treated fairly.” https://www.bloomberg.com/news/articles/2022-12-30/valkyrie-unveils-proposal-for-grayscale-s-troubled-bitcoin-trust-gbtc

The Valkyrie Bitcoin Strategy ETF seeks to purchase enough Bitcoin futures contracts that the notional value of the Bitcoin within the contracts held by the fund are as close to 100% of the fund’s net assets as possible. This distinguishes Valkyrie from the other proposed funds, all of which plan on investing in other investment vehicles and products that provide exposure to Bitcoin, such as private trusts. The fund will invest any remaining assets in “collateral investments” defined as U.S. Government securities such as bills and bonds, money market funds, and corporate debt securities. Corporate debt securities must be issued by a business with a time of purchase rating in one of the four highest categories of a nationally recognized statistical rating organization like S&P Global Ratings. The collateral investments are designed to provide liquidity. The fund will invest indirectly via a wholly owned Cayman Islands subsidiary that will have the same investment objective, advisor, and sub-advisor. The fund will invest no more than 25% of its total assets each year. The application lists Steven McClurg, Rafael Zayas, and Ryan Dofflemeyer as the fund’s portfolio managers. The fund is classified as non-diversified and therefore not required to meet diversification requirements under the Investment Company Act of 1940. The fund will not invest directly in Bitcoin.