Will Grayscale be the next FTX?

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On Nov. 18, Grayscale, the asset man­ag­er run­ning the world’s largest Bit­coin (BTC) fund, released a state­ment detail­ing the secu­ri­ty of its dig­i­tal assets prod­ucts and affirm­ing that it won’t share its proof of reserves with customers. 

“Due to recent events, investors are under­stand­ably inquir­ing deep­er into their cryp­to invest­ments,” the state­ment begins, which is quite the under­state­ment fol­low­ing the implo­sion of FTX and the inquiry 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’s unlike­ly. And that’s large­ly because the peo­ple at the top, the ones who made Grayscale what it is, appear to be more com­pe­tent than Sam Bankman-Fried ever was. 

Let’s look at the facts. 

It’s true and pos­si­bly unde­ni­able that the cryp­to indus­try will take anoth­er dive if Grayscale doesn’t fix its bal­ance sheet. The space sim­ply can­not afford anoth­er crash, not so soon after FTX and not that of such a key play­er. Grayscale over­sees more than $10 bil­lion in BTC, Ether (ETH) and oth­er assets and rep­re­sents its par­ent company’s biggest rev­enue generator.

Relat­ed: It’s time for cryp­to fans to stop sup­port­ing cults of personality

Grayscale’s par­ent com­pa­ny — the same that owns trad­ing firm 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 address­ing all the “noise” sur­round­ing the com­pa­ny. He indi­cat­ed that despite the so-called cryp­to win­ter, the com­pa­ny was on track to reach $800 mil­lion in rev­enue and its sep­a­rate enti­ties were “oper­at­ing as usual.”

“We have weath­ered pre­vi­ous cryp­to win­ters,” the CEO’s note read, “and while this one may feel more severe, col­lec­tive­ly we will come out of it stronger.” 

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 cryp­to, 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. This is not, in oth­er words, his first rodeo.

Relat­ed: From the NY Times to WaPo, the media is fawn­ing over Bankman-Fried

Sil­bert, along with Grayscale’s own lead­er­ship, has also been putting up a par­al­lel fight with the U.S. Secu­ri­ties and Exchange Com­mis­sion after reg­u­la­tors reject­ed its appli­ca­tion to turn its flag­ship Grayscale Bit­coin Trust (GBTC) into a spot Bit­coin exchange-trad­ed fund (ETF), the first Unit­ed States one. The SEC did so on the grounds of “fail­ure by the invest­ment man­ag­er to answer ques­tions about con­cerns around mar­ket manip­u­la­tion” and poor invest­ment pro­tec­tion, but you could just as well make the argu­ment that had they accept­ed the bid, cryp­tocur­ren­cies would have had the oppor­tu­ni­ty to “open up to more insti­tu­tion­al invest­ment” and poten­tial­ly avoid the cur­rent down­turn we’re experiencing.

Grayscale then filed a peti­tion chal­leng­ing the deci­sion with the U.S. Court of Appeals for the Dis­trict of Colum­bia and pro­ceed­ed to sue the watch­dog for what it called an “arbi­trary, capri­cious, and dis­crim­i­na­to­ry” ruling. 

In oth­er words: to any­one who cares about the future of cryp­to and believes in the impor­tance of reg­u­la­tors act­ing in good faith to pro­pel the indus­try for­ward, Grayscale is fight­ing a good fight. 

“Pan­ic sparked by oth­ers is not a good enough rea­son to cir­cum­vent com­plex secu­ri­ty arrange­ments that have kept our investors’ assets safe for years,” Grayscale’s Nov. 18 state­ment not­ed. They have proven their worth and sub­stan­ti­at­ed their rep­u­ta­tion with a decade-long track record of con­sis­tent growth. This is unlike­ly to change any­time soon.

Daniele Ser­vadei 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 to be and should not be tak­en as legal or invest­ment advice. The views, thoughts, and opin­ions expressed here are the author’s alone and do not nec­es­sar­i­ly reflect or rep­re­sent the views and opin­ions of Cointelegraph.

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