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An investment management firm with considerable holdings of Grayscale’s Bitcoin Trust (GBTC) wants the asset manager to do something about its premium.

Marlton published an open letter to Grayscale on April 6 asking it to conduct a tender offer of its shares.

Currently, GBTC shares are trading at a discount of about -8%. Investors purchase GBTC shares at net asset value (NAV) and then face a six-month lock-up before they can be sold on over-the-counter markets. When the price of GBTC shares dips below its NAV, they’re trading at a discount. 

For years, GBTC shares traded at relatively high premiums or higher prices than their NAV. That declined this year, especially as new crypto-focused structured products entered the market, until it began trading at a discount in February for the first time.

A solution?

Marlton thinks the answer to this problem is a Modified Dutch Auction Tender Offer (MDATO) for GBTC shares, calling it a “well proven closed-end fund strategy that is often initiated by sponsors or managers for the purposes of closing discounts to NAV,” in a statement accompanying its letter. 

An MDATO sees the firm set a price range that they would be willing to repurchase shares, allowing shareholders to liquidate holdings by tendering them within the range if they so choose. The firm, in this case, Grayscale’s parent Digital Currency Group (DCG), would repurchase a certain value of shares at the most competitive price within the range. 

If accepted, this wouldn’t be the first solution Grayscale has tried. DCG  purchased $250 million worth of GBTC shares, but that hasn’t translated to a return to a premium.

“The approved authorized purchase is ineffective and that has been shown through the market’s reaction — a deeper discount to NAV,” said Marlton’s letter.

As of now, there are no plans to conduct an MDATO, according to Grayscale. 

The sentiment

Yesterday, Grayscale announced its plans to reapply to convert GBTC into a bitcoin exchange-traded fund (ETF). Marlton also addressed this, saying it sees the intention to reapply as “simply doubling-down on a wait and see strategy,” since previous applications were unsuccessful.  

Grayscale remains the dominant force in the crypto structured products game, with $39 billion in assets under management. However, Marlton said it and other stockholders are frustrated and concerned that Grayscale has yet to find a way to turn the tide, remaining “unconvinced” by the confidence that the discount is a non-issue caused by supply and demand disparity.

Marlton called this take “irresponsible,” arguing that the discount has translated to a $3.1 billion loss for stockholders. 

“From a governance perspective, we are frustrated that the Board might allow management to squander the Company’s leading market share to the detriment of GBTC stockholders, whilst simultaneously rewarding yourselves handsomely with a profligate, market leading, 2% management fee. Marlton and other stockholders will not tolerate such clear destruction of stockholder value.”  

When reached for comment, Grayscale didn’t respond to the statements made in Marlton’s letter but said it remains “100% committed” to converting GBTC to an ETF. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Coinme, the second-largest bitcoin ATM operator in the United States, has obtained the proper licensure to offer its services in Florida, according to a company statement.

The company will now place 300 machines in grocery stores across the state through its partnership with Coinstar, the physical kiosk manufacturer. 

While Bitcoin ATM operators are federally regulated through the Financial Crimes Enforcement Network, state guidelines also limit where they can actually set up shop. Coinme already had 5,607 locations across the United States, according to a map of available Coinme locations, including some in Florida’s neighboring state Georgia.

“Our team has been working with state regulators in an effort to launch Coinme on Coinstar kiosks throughout the state, and we are thrilled to secure a license to offer a cash onramp to purchasing bitcoin to the residents of Florida,” said Coinme co-founder and CEO Neil Bergquist in a statement. “Through our partnership, we’re able to continue to expand into new areas to meet the ever-growing demand of accessible avenues to purchasing digital currencies.

The Coinme-powered kiosks in Florida will be located in large grocery store chains like Winn-Dixie, Harveys and Fresco y Mas across major cities like Jacksonville, Miami, Orlando and Tampa, as well as smaller towns.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The crypto market-making firm Jump Trading is working on a new initiative that aims to decentralize real-time trading data.

Jump’s involvement in the Pyth Network was discussed during a new episode of its “The Jump Off Point” podcast, published on April 7. During the episode, president and chief investment officer Dave Olsen detailed the project, which was incubated by Jump. 

“We’re very involved in the development of a new capability that, at least as of this taping, has not been announced yet. Which I’ll do now. We’re collaborating on a world oracle project called Pyth” Olsen said during the April 7 episode.

Pyth Network’s objectives include “[a]llowing the raw material of very high performance, very precise market data to be injected into smart contracts that were written using these protocols.”

Olsen specified that Pyth will be built on Solana blockchain. Olsen’s commentary came in the context of praise for DeFi in general and, in particular, Project Serum, a permissionless Solana-based decentralized exchange launched by FTX. A blog post outlining the Pyth Network further specified that the project:

“[R]equires legally authorized access to unique data sets, sub-second update speeds, sophisticated outputs and aggregation methods, and a thorough incentive system to ward off spurious or malicious data breaches.”

The roster of firms working on Pyth remains unclear, as does the amount of investment that Jump or others have committed to the project. A representative for Jump declined to specify whether Pyth had received any investment as of the announcement. 

Jump is a major player in cryptocurrency trading and, via affiliate Jump Capital, a leading investor in crypto projects. Despite this, Jump keeps a relatively low profile, though executives from Jump have previously discussed its project incubation strategies.

In a separate development, Reuters reported Wednesday that Jump Trading had invested an undisclosed amount in Chiliz, a blockchain startup that makes so-called “fan tokens” tied to sports teams. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bitcoin mining firm Hut 8 is seeking to raise $500 million CAD — an amount worth roughly $ 395.8 million — in Canada, according to public documents.

A short-form prospectus dated April 7 indicates that the offering will take place on the Toronto Stock Exchange, where the firm’s shares already trade. A decision document penned by the Ontario Securities Commission was issued on April 7. 

Per the prospectus, the proposed offering would take place during the 25-month period in which the prospectus is deemed effective. 

That Hut 8 would seek to raise the funds is perhaps surprising, given the bullish activity around mining stocks, as shown in the chart below. Miners have attracted interest from institutional investors seeking exposure to bitcoin, and that heightened interest has resulted in elevated prices for mining hardware as well. 

Earlier this year, Hut 8 announced that it was borrowing $11.8 million from Digital Currency Group mining subsidiary Foundry to fund an expansion of its mining operations. 

“This partnership builds on Hut 8’s ongoing commitment to shareholders by mitigating supply constraints and reducing our capital expenditure with a proactive fleet management strategy,” Jaime Leverton, Hut 8’s CEO, said at the time.

In March, Hut 8 released its fiscal year 2020 earnings, in which the firm said it was on track to hit 1.3 exahashes per second of mining power by the second quarter of fiscal year 2021, after reaching 1.3 EH/s in January.

Hut 8’s stock is currently trading at $8.58 CAD at time of writing, according to data published by Yahoo! Finance.

A full copy of the prospectus can be found here:

Hut 8 Prospectus by MichaelPatrickMcSweeney on Scribd

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Coinbase CEO Brian Armstrong is releasing a collection of electronic music non-fungible tokens (NFTs) that he created with DJ DAVI, also known as David Khanjian. 

“I listened to a lot of electronic music with no vocals as I was coding up the early versions of Coinbase, and always enjoyed David’s music. (no vocals because I couldn’t concentrate with other words in my head),” Armstrong tweeted on Wednesday. 

Armstrong says he took up electronic music composition as a hobby after the COVID-19 pandemic began, and that DJ DAVI gave him free music lessons. They created the minted tracks together as Armstrong was learning. 

“To be clear – 99% of the talent comes from him, but it was fun for me to work on them none the less,” he tweeted. 

All proceeds of the sale will go to DJ DAVI. According to Armstrong, the theme of one of the tracks is about building with technology and never giving up. 

The three tracks will be released as NFTs on Zora.co, a Coinbase Ventures-backed company. More details will be announced in the next few days. 

Armstrong’s announcement comes a day after Coinbase released a preliminary financial report for 2021’s first quarter, reporting an estimated $1.8 billion in revenue for the three months ending March 31. 

Coinbase is set to go public via a direct listing on April 14. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

South Korea’s government has pledged to focus on illegal activities in crypto markets. 

The South Korean Financial Services Commission, Ministry of Finance, Ministry of Justice, among other regulators, met on April 7 to discuss virtual asset trading. In their announcement following the meeting, the authorities wrote:

“We will strictly crack down on illegal activities related to transactions such as market price manipulation, money laundering, and tax evasion using virtual assets through cooperation with the police, prosecution and financial authorities.”

Furthermore, the authorities alluded to an increase in efforts to monitor crypto transactions in order to facilitate income tax collection on crypto-asset gains, a policy that’s scheduled to come into effect at the beginning of 2021.

Following the meeting and the official announcement that crypto was in the crosshairs of regulatory action, the so-called “Kimchi premium,” the longstanding elevated cost of BTC in South Korea, took a nosedive: 

Source: TradingView

Wednesday’s announcement seems to have reversed a trend in the Kimchi premium that The Block analyzed earlier this month.

It’s important to note that none of the agencies involved in the meeting seems to have suggested actual changes in the country’s laws or regulations. Instead, they merely affirmed a new focus on enforcing existing provisions. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The world’s two largest bitcoin mining hardware makers are once again embroiled in an intellectual property dispute.

Chinese IP trade media IPEconomy reported on Wednesday that Bitmain filed a lawsuit with the Beijing IP Court on April 7 against MicroBT, alleging the Shenzhen-based bitcoin miner maker and  founder Yang Zuoxing, a former chief chip designer at Bitmain, of stealing corporate secrets.

Bitmain already sued MicroBT and Yang in 2017 for infringing a patent that Bitmain had been awarded for its technology used in designing an application-specific integrated circuit (ASIC) for bitcoin mining. But the case was dismissed by the Beijing IP Court in 2018, which also revoked Bitmain’s authorized patent altogether. 

But it seems Bitmain still hasn’t given up, with the new civil case demanding a damage claim of as much as 99 million yuan, or $15 million, from MicroBT.

The new case again puts the spotlight to the long-time rivalry between the two firms, as MicroBT’s growth since 2019 has significantly eroded Bitmain’s dominance in the bitcoin mining hardware market.

According to IPEconomy, the Beijing IP Court notified Bitmain that it has received the complaint and will proceed accordingly. It’s unclear when the first hearing will be scheduled.

Per the report, Bitmain has accused Yang of stealing corporate secrets after he completed the research and development for Bitmain’s once flagship mining equipment the AntMiner S7 and S9 in May 2016. Bitmain further argued that Yang founded MicroBT to launch a rival product in July before he officially left Bitmain.

Yet Yang’s recount of the history, outlined in a 2018 profile published by CoinDesk, tells a different story.

Friends to foes

The history of the feud dates back to 2014 when Yang joined ASICMiner, a bitcoin mining hardware maker founded in 2012 by Jiang Xinyu – also known as Friedcat on bitcointalk.org.

Shortly after Friedcat’s mysterious disappearance in early 2015, Yang said he joined Bitmain after having presented his full-custom chip design technology to Micree Zhan, Bitmain’s co-founder and chairman.

But Yang said he was on a part-time gig designing chips for Bitmain’s S7 in Shanghai as he didn’t initially fit in with Bitmain’s “working environment” and “didn’t feel respected.”

Bitmain rolled out the S7 in August 2015 and Yang said he subsequently had several rounds of equity negotiations while designing the S9, which was launched a year later. 

Per Yang’s recount, the talks didn’t go well. Although Bitmain’s other co-founder, Jihan Wu, was willing to offer two percent of equity, Zhan was said to only comfortable with 0.5 percent.

As the talks fell through, Yang said he ended his contract with Bitmain in June 2016 and launched MicroBT a month later. Nonetheless, the success of the AntMiner S7 and S9 brought Bitmain some $1 billion in net profits during the 2017 bull market, with millions of units sold in one year.

The dispute also brought to the fore some of Yang’s recent legal troubles. Bitmain’s second lawsuit comes months after the Shenzhen prosecutor released Yang from a criminal charge, which was believed to be reported by Bitmain.

Yang was arrested in December 2019 by the police in Shenzhen under a charge of embezzlement but was released on parole at least as of August 2020, per an IPO filing to the Shanghai Stock Exchange by a MicroBT supplier, whose main revenue came from testing chips for the manufacturer.

The arrest came at the back of MicroBT’s growth period in 2019. Per the supplier’s IPO filing, MicroBT’s revenues grew from $62 million in 2017, to $230 million in 2018 and $626 million in 2019.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• Some of the United Kingdom’s biggest mortgage lenders do not allow proceeds from crypto investments to be used for deposits
• NatWest, Nationwide and Barclays are among those that will approve mortgages for crypto holders

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Nasdaq-listed bitcoin mining firm Riot Blockchain has placed an order to buy bitcoin miners worth $138.5 million that will ship through October 2022.

The firm said in a statement on Wednesday that it is buying 42,000 units of Bitmain’s AntMiner S19j at a cost of $3,300 per set, which means Riot is preordering the future batches at $36 per terahashes per second (TH/s) of computing power. The standard hash rate of an AntMiner S19j is 90 TH/s.

The Block reported last week that spot stock prices for the newest generation of bitcoin mining equipment, such as Bitmain’s S19 series, are as high as $120 per TH/s, constituting a five-fold premium compared to their preorder prices months ago.

While Riot’s cost for the new orders appears to be considerably cheap compared to those spot prices, the delivery of the new batches will not start until later this year.

Riot said it is poised to receive a minimum of 3,500 units of S19j AntMiners on a monthly basis starting in November, with shipments continuing through October 2022.

At the full deployment, the firm said it is estimated to have 7.7 million TH/s of computing power, or about 4.6% of the network’s current total.

Bitcoin’s surging prices and the ongoing global chip shortage have significantly driven up the cost of bitcoin mining equipment. 

Indeed, Riot inked a deal with Bitmain in August 2020 to invest $17.7 million in 8,000 units of the manufacturer’s AntMiner S19 Pro, which were scheduled to be fully delivered by this month.

The standard hash rate of an AntMiner S19 Pro is at 110 TH/s, which means Riot is now paying 50% more for a mining model that is less advanced than the ones it bought last year.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The planned partnership between crypto exchange FTX and the Miami Heat basketball team is official.

Announced Wednesday, the deal will see FTX.US become “The Official and Exclusive Cryptocurrency Exchange Partner of the Miami HEAT”, per a press statement, beginning with the 2021-22 NBA season. As part of the team, the Heat’s home stadium will now be known as “FTX Arena.” 

Other parts of the deal include “prominent in-arena signage, hospitality, association with HEAT digital content series, promotions, contests, community engagements and more,” the team said.

“We wanted to partner with a city and a franchise that are dynamic, diverse, innovative and always forward-looking,” Sam Bankman-Fried, CEO of FTX, said in a statement. “When it comes to those qualifications, Miami and the HEAT are second to none.”

As previously reported, the deal was first hammered out between the NBA team, FTX and county officials. The deal is valued at $135 million, some $90 million of which will be directed to Miami-Dade county over a 19-year period. The deal received approval from the county’s Board of Commissioners on March 26 during an at-times contentious board meeting. The funds will be used to support programs that address issues like gun violence and at-risk youth. 

“This is a ground-breaking, first-of-its-kind partnership in our industry that will draw global attention,” Eric Woolworth, president of The HEAT Group’s business operations, said in the statement.  

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.