Grayscale Liquidation Could Unleash A Bitcoin Armageddon

1 year ago

The FTX Contagion effects bash not adjacent halt astatine the largest organization Bitcoin merchandise connected the market, the Grayscale Bitcoin Trust (GBTC). As a effect of the bankruptcy of Sam Bankman-Fried’s crypto exchange, the discount to the NAV of Grayscale’s GBTC money has fallen to astir -40%.

As precocious arsenic the extremity of 2020, GBTC was trading astatine a premium of +40%. However, successful January 2021, the inclination reversal occurred erstwhile Grayscale’s Bitcoin money traded astatine a discount for the archetypal time. Since then, GBTC has been connected a downward slide.

GBTC’s largest owners see Cathie Wood’s ARK Invest (0.85%), Horizon Kinetics (0.34%), Simplify Asset Management (0.06%) Systelligence (0.04%), Parkwood (0.04%), Emerald Mutual Fund (0.03%) and Rothschild Investment (0.01%), according to CNN Business.

Doomsday for Bitcoin

Recent events person led Grayscale Bitcoin Trust to go perchance the azygous biggest hazard to the Bitcoin market. As NewsBTC reported, Genesis Global had to intermission each withdrawals for its lending concern connected Wednesday owed to “unprecedented marketplace turmoil.”

This is concerning for the Grayscale Bitcoin Trust successful that Genesis Global served arsenic the liquidity supplier for the trust. Genesis Global’s genitor institution is Digital Currency Group (DCG). This successful crook is besides the genitor institution of Grayscale.

Shortly aft the Genesis announcement, Digital Currency Group clarified that the substance would person nary interaction connected its ain business. DCG stated that Genesis is not a work supplier “for any” Grayscale product.

Furthermore, the institution asserted that it does not lend, borrow, oregon pledge Bitcoin, and that its custodian – Coinbase – is prohibited from engaging successful specified activities. In addition, SEC and OTC markets reports and audited fiscal statements are filed.

Grayscale products proceed to run concern arsenic usual, and caller events person had nary interaction connected merchandise operations.

The assets underlying $GBTC and each Grayscale products stay harmless and secure, held successful segregated wallets successful heavy acold retention by our custodian Coinbase .

Still, the assemblage is bellyaching. A dissolution of GBTC could mean Armageddon for Bitcoin. The illness of Terra Luna, connected the different hand, would person been fun.

The Grayscale Bitcoin Trust presently holds 634,000 BTC. The Terra Luna Foundation “only” liquidated 80,000 Bitcoins, and inactive managed to clang the BTC terms from $40,000 to $20,000.

As Ryan Selkis reported, DCG is successful a liquidity squeeze. “Appears holding company’s (DCG) liquid assets are beneath liabilities. As a result, it looks similar DCG is looking to rise extracurricular funding”. However, this tweet is present deleted.

The Bitcoin assemblage is present demanding impervious that Grayscale really holds astir 634,000 BTC successful reserve astatine Brian Armstrong’s Coinbase. However, neither Grayscale nor Coinbase person shown immoderate absorption truthful far.

All that is presently disposable is simply a CSV record that is updated daily. As expert Dylan LeClair explained, it should beryllium comparatively feasible to nutrient a impervious of reserves if each BTCs are held astatine Coinbase.

Does anyone cognize of the addresses for the 630k BTC successful $GBTC? Are determination immoderate signifier of impervious of reserves and if no, why?

We person a afloat transparent nationalist ledger truthful we tin audit this stuff.

All I tin find is simply a CSV record that updates daily. Why not people the addresses?

— Dylan LeClair 🟠 (@DylanLeClair_) November 17, 2022

But disapproval besides heads towards the U.S. Securities and Exchange Commission. If president Gary Gensler had approved the conversion of GBTC into an ETF, the Armageddon script would not adjacent exist.

Instead, Gensler preferred to cull spot Bitcoin ETFs and flood the marketplace with insubstantial BTC. The FTX fiasco whitethorn besides lend to the deficiency of support for a spot ETF successful the adjacent future.

Meanwhile, Chris Burniske, spouse astatine Placeholder and erstwhile crypto main astatine ARKinvest, tweeted that fears surrounding the unwinding of GBTC and ETHE are unfounded, an illustration of hysteria.

He retweeted Bob Loukas who wrote that the spot volition not spell distant arsenic it is simply a wealth printing machine.

They make similar $700m successful fees and investors can’t halt it. […] They could get billions against that currency flow.

Also, You’re not sidesplitting the goose to prevention Genesis. They’re fire-walled.

At property time, Bitcoin investors seemed to hold with Chris Burniske. BTC remains successful a wait-and-see mode.