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Institutional Funds Update – DBS Bank, Grayscale, Citadel Securities, Ark Invest, and More



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Notwithstanding the heavy losses witnessed across the crypto market last year and a new wave of regulatory enforcement actions this month, institutional outfits have maintained their belief in the sector. This conviction of a bright future for the digital asset sector is evidenced by several recent bets on crypto offerings and companies that bear direct exposure.

George Soros' family office reveals bets in Silvergate, MicroStrategy and Marathon

The Soros Fund Management, the investment vehicle of financier-cum-philanthropist George Soros, extended its indirect exposure to crypto towards the end of last year. A 13K SEC filing coming to light this week shows that the family office, previously run as a hedge fund, has call and put options on Saylor-led business intelligence firm and largest corporate Bitcoin holder MicroStrategy. The filing vaguely detailed another bet in the form of put options on crypto-friendly bank Silvergate. The private investment management firm also has a recorded transaction of 39.6 million worth of convertible debentures of Bitcoin mining firm Marathon Digital.

Citadel Securities and Susquehanna Advisors Group reveal positions in Silvergate

A separate 13G filing with the SEC revealed that Citadel Securities, founded by billionaire Kenneth Griffin also acquired a stake in the troubled bank. Previously a skeptic, Griffin changed his tune on the crypto sector last March, citing the-then significant market capitalization of about $2 trillion. Though this figure has since halved, the billionaire investor appears to have maintained his new-found stance. The market-making firm scooped up 1.6 million shares – representing a 5.5% stake – for around $25 million at the end of last year, the filing detailed.

In total, the Miami-based capital markets firm owns 1.73 million Silvergate shares.  Susquehanna Advisors Group also revealed in a 13G filing a position of 2.36 million shares in the crypto-friendly bank, translating to a 7.5% stake. Last month, BlackRock, the world's largest investment management firm, communicated it had increased its stake in the Californian bank to 7.2%. Silvergate, which focuses on fintech and digital assets, had massive exposure to FTX group and Alameda Research – a bet that has proved costly, placing it in a predicament.

Hong Kong's receptive jurisdiction draws in Interactive Brokers

NASDAQ-listed Interactive Brokers this week advanced with its plans to offer crypto trading in Hong Kong. In partnership with OSL Digital Securities, the US-based brokerage firm launched an institutional-focused digital assets trading service on Tuesday targeting professional investors in the region. The broker's APAC regional head David Friedland highlighted Hong Kong as an ‘important market' owing to the growing digital asset demand.

“Eligible clients, including individuals with over HKD 8 million in investable assets or institutions with assets greater than HKD 40 million who are residents of Hong Kong, can now trade crypto [Bitcoin and Ethereum] alongside other asset classes available on the Interactive Brokers platform creating a unified client experience,” the broker said on Monday.

In recent months, the independent city (separate from mainland China) region of Hong Kong has accelerated efforts to create a seasonable and receptive venue for global fintech companies. Its digital asset market has seen massive developments across regtech and suptech vertices. Last month, Hong Kong's financial secretary Paul Chan signaled that the government was open to business and other strategic collaborations with crypto companies looking to set up shop in the region.

To learn more about Ethereum, check out our Investing in Ethereum guide.

Ark Invest continues Coinbase stock accumulation

On Monday, Cathie Wood's investment management firm, ARK Invest, added to its previous (Feb 10) scoop of 162,325 Coinbase shares, bringing its February investment in the exchange to almost $16 million. The firm has purchased a total of 281,020 shares this month, spread across its ARK innovation and ARK Next Generation Internet ETFs. The asset manager's portfolio shows a cumulative stack of 614,657 COIN shares across its funds, bought for $28.8 million. Coinbase's Q4 earnings report, expected next week, is expected to reflect a slump (year-on-year) in trading volumes and active users owing to the massive downturn following the FTX collapse.

DBS bank-member's exchange reports growth across 2022

In other news, Singapore-based DBS Digital Exchange (DDEx) reported on Tuesday that it recorded an 80% year-on-year increase in Bitcoin trade volume on its trading platform in the gone financial year. The volume of Bitcoin held on the bank's members-only exchange for clients doubled across the same period.  Ether transacted volume on the platform grew by 65% while that of custodied tokens swelled by 60%. The bank-backed digital exchange supports trading of Bitcoin (BTC) and other altcoins like Ether (ETH), Ripple (XRP), Bitcoin Cash (BCH), Polkadot (DOT), and Cardano (ADA).

The DDex exclusive platform also reported an increase in institutional clients – the bank had plans to accommodate retailers but shelved them last April. The Southeast Asia lender expanded its self-directed cryptocurrency trading service (previously restricted to family offices, corporate and institutional investors) to include accredited wealth clients in September. In the meantime, the DBS Group intends to offer crypto services in Hong Kong, with plans underway to secure the appropriate license. DBS Bank's Hong Kong chief executive Sebastian Paredes confirmed the news on Monday, noting that though the bank remains cautious, especially about the risks associated with crypto, it is open to taking advantage of the region's innovation-friendly policy shift on digital assets.

To learn more about these tokens, visit our Investing in Polkadot and Investing in Cardano guides.

Grayscale's GBTC Discount to NAV edges towards December’s highs

The Grayscale Bitcoin Trust (GBTC), earlier this week, traded near record high levels in discount/ premium to net asset value (NAV) as the parent company of its issuer, the conglomerate Digital Currency Group (DCG), wallows in legal troubles. The discount of GBTC shares to NAV rose as high as -47.35% on Monday, a change that comes hardly a month after its value had fallen to -36.28%.

GBTC discount to NAV chart. Source: YCharts

The premium to NAV of GBTC, the world's largest publicly traded bitcoin fund, has been edging towards record highs for most of February and was sitting at -42.53% when DCG commenced the sale of shares in a number of its premium crypto funds at a substantial discount, intending to raise capital to reimburse creditors of its bankrupt crypto lender Genesis. DCG resorted to a heavy restructuring plan earlier this month to settle financial obligations for its collapsed lending units under Genesis.

GBTC shares. Source: TradingView

GBTC shares closed at $10.67 on Monday, the lowest level in over a month. This figure earlier this year surged 28% against the disputes linked to DCG and a campaign to redeem the Trust as the market recovered. The flagship Bitcoin Trust saw the discount from its NAV fall to – 36.28% on Jan 13, reclining away from – 48.89% on Dec 13.

Uncertainties surrounding GBTC in the background

There is a lingering lawsuit that Osprey Funds filed on Jan 30, claiming that Grayscale engaged in false and deceptive advertising of GBTC. Osprey said that the firm deliberately misled investors by presenting GBTC's conversion into an ETF as a “foregone conclusion” despite being cognizant of the fact that it was improbable. Osprey's complaint asserted that despite GBTC's fees being four times higher than a comparable product it offers, Grayscale's unfair trading practices enabled it to capture 99.5% of the over-the-counter trust asset market.

GBTC relative performance chart

Meanwhile, the SEC has denied approval for converting GBTC into a spot Bitcoin exchange-traded fund (ETF), which would make it redeemable for investors. Grayscale is, however, actively seeking legal recourse to overturn the decision. Notably, while the Trust is non-redeemable and seems tied to DCG, all digital assets held by the investment vehicle are hosted on Coinbase exchange. Though Grayscale declined to release a Proof-of-Reserves report citing security concerns, one independent researcher has previously estimated the Trust has about 633,000 Bitcoin, by far the most prominent legal holder of the asset.

To learn more about Bitcoin, check out our Investing in Bitcoin guide.

Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.