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- Tantra Labs are winding up operations
- Labs not able to pay promised BTC and ETH returns to investors
- GBTC discount cited as reason for failure
- Labs not able to restructure balance sheet or derive alternative strategy
Tantra labs focused on providing its investors with “interest bearing investment products.” Their goal was to provide the most competitive returns denominated in BTC and ETH. Initially, Tantra tried to attract investments by offering BTC worth $100, when depositors sign up and 12% (later 6%) APY. Reportedly, the company had more than 80 million assets under their management.
However, Tantra labs were not able to perform as they anticipated. There is a degradation in the company’s performance. With the portfolio of the company not performing well, the balance sheet of the company is put in to a pathetic position.
Russell LaCour, CEO of Tantra expressed: “GBTC discounted to unprecedented lows, directional portfolio performance degradation, and interest spreads collapsing”
GBTC discounted to unprecedented lows: GBTC shares can trade at premiums or discounts to its net-asset value (i.e., the value of the Bitcoin it holds).
While GBTC first fell into a discount last February in 2021 as the number of shares outstanding skyrocketed, after years of trading at a premium to Bitcoin. However, the launch of Bitcoin ETFs in Canada and the first U.S. derivatives-backed Bitcoin ETFs eroded GBTC’s competitive advantage. This in turn has left institutions like Tantra labs that acquired shares at NAV a year ago in loss.
Grayscale offers prices which are dictated by the market and not by Grayscale itself. So, price fluctuations are a result of supply and demand.
The GBTC discounts touched a record high of 28% this week. Grayscale has been stating that they are looking to convert their trust to an exchange-traded fund; however, the U.S. Securities and Exchange Commission has refused to approve a physical bitcoin-backed ETF.
Tantra Labs reliability on Grayscale for returns did not pay back well.
Peter Schiff recently expressed: “Why buy Bitcoin in the market when you can buy all the Bitcoin you want through GBTC for 73 cents on the dollar? If institutions really are buying Bitcoin, why are those already invested in GBTC so desperate to get out and why don’t other institutions want to buy at a discount? Bitcoin is one of the worst performing assets over the past three months. If that recent trend continues it will become one of the worst performing assets of this decade. The gains over the last decade don’t help people buying it now.”
Directional Portfolio Performance Degradation: A directional strategy is any trading or investment strategy that entails taking a net long or short position in a market. With trends not in favor investor interest is declining and they want to cash out.
Interest Spreads Collapsing: The net interest rate spread is the difference between the interest rate a bank pays to depositors and the interest rate it receives from loans to consumers. Tantra labs are not enjoying an advantage with interest spread either.
Everything together Tantra is at loss. Sensing the loss Tantra labs tried to restructure their balance sheets to arrive at some strategic option.
However, noting worked out and LaCour stated, “Ultimately, after significant discussion and consideration in consultation with outside counsel and other professional advisors, the executive board determined that, in view of all the circumstances, it is in the best interest of the company to wind up operations, liquidate our balance sheet and effectuate an orderly and fair and equitable distribution of our assets.”
Due to several factors the share price at GBTC has been trading at a record discount to the value of the underlying bitcoin in the fund.
