The largest asset management firm in the crypto space, Grayscale Investments, had a bit of a rough quarter. The company is looking to get back in the black, a potentially herculean task.
Grayscale's assets under management took a massive hit following huge market drops - in sharp contrast to the start of 2021.
Market Rout Hurts Grayscale's' AUM
On the last day of 2021, Grayscale Investments shared a look into its assets under management. The company revealed $43.6 billion in assets - a drop of 29 percent from the $61 billion the company held at the end of November.
Assets under management for Grayscale's Bitcoin Trust dropped from $43.5 billion to $30.4 billion - a decline of 30 percent. The company's Ethereyum Trust saw a 22 percent drop, moving from $15 billion to $11.6 billion.
The drops accompanied the bearish market condition. Bitcoin and other major altcoins tumbled all through December, Bitcoin dropping its value by 18 percent all through the month. And we saw significant drops in values of other currencies making up large chunks of Grayscale's assets - including Ether and Litecoin.
SEC Delay All But Nixes Grayscale's ETF Ambitions
The drop in assets under management is just the latest setback for Grayscale. The Securities and Exchange Commission (SEC) might open the doors for a Bitcoin exchange-traded fund (ETD) after companies like WisdomTree and ProShares gained approval for ETFs that track the price of Bitcoin's future. Grayscale immediately filed to convert its Bitcoin Trust to an ETF.
Back in October, Jennifer Rosenthal, the company's communications director, said in a Twitter thread that Grayscale would offer an ETF, essentially converting the Bitcoin Trust.
"Once there's official and verifiable evidence of the SEC's comfort with the underlying Bitcoin market — likely in the form of a Bitcoin Futures ETF being deemed effective — the NYSE Arca will file a document called the 19b-4 to convert $GBTC into an ETF," Rosenthal said in part.
Sadly, this didn't exactly pan out. For one, the SEC failed to show any signs of approving pure Bitcoin ETFs. And worse, the agency confirmed it would delay its decision on Grayscale's ETF conversion until February 6.
In a December press release, the SEC explained it needed more time to determine whether Grayscale's ETF proposal was the best move - specifically surrounding investor protection and other high-priority SEC requirements.
SEC delays are never a good sign for Bitcoin ETF applications. Most jump to the conclusion that SEC will reject the company's advances. Once again, it could be back to the drawing board for Grayscale and other companies shooting to launch an ETF.
Making Moves for The New Year
Still, Grayscale has high hopes for the new year. The company announced on January 3 it had rebalanced the Grayscale DeFi Fund and adjusted positions of its Digital Large Cap Fund.
According to the announcement, Grayscale has rebalanced its DeFi Fund's weightings, removing two assets - AMP, the native collateral token for the Flexa payment network, Bancor's native BNT token, and Universal Market Access (UMA). Even with the weighting reshuffling, Grayscale refused to change the token list of its Grayscale Digital Large Cap Fund (GDLC).
The Grayscale DeFi Fund currently holds $10.3 million in assets under management - a drop of 1.2 percent since its inception on July 14.
Grayscale will also want to watch SEC developments on the ETF front. The fact that the agency hasn't greenlit any ETF applications doesn't mean it won't do so down the line. As soon as regulatory waters change, Grayscale will be among the first to jump in.