Bitcoin With 46% Discount But No Transparency Fund Grayscale – BLOX

Legislators, users and investors all benefit from more transparency in the funds of crypto exchanges, but Grayscale contradicts this. They see transparency as a threat to the security of their customers.

Security risks Grayscale proof of reserve

Grayscale manages cryptocurrency in its fund on behalf of investors, but says it does not want to provide exact on-chain proof of its reserves due to security risks.

Since it became known that the now-bankrupt crypto exchange FTX misappropriated its customers’ funds, other exchanges and companies have been eager to share ‘reserve proof’ to ensure customer solvency.

What is proof of reserve

Nic Carter, a long-time proponent of proof-of-reserve trusts, funds and exchanges, explains it this way:

“Proof of Reserves is the idea that custodians holding cryptocurrencies must provide public certificates regarding their reserves, combined with proof of user balances (liabilities). The equation is simple (in theory):

Proof of reserve + proof of liability = proof of solvency

Coinbase Stores Bitcoin Grayscale

On Twitter, Grayscale says all of its digital assets that underpin its products are stored under custody from Coinbase Custody Trust Company, but for security reasons, the company will not release cryptographic evidence of its reserves.

Coinbase regularly performs on-chain validation. For security reasons, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic proof of reserve or other advanced cryptographic accounting procedure.”

They believe that they should not be victims of ignorance at FTX.

“We know that the above point in particular will be a disappointment to some, but panic fueled by others is not a good reason to bypass complex safeguards that have kept our investors’ assets safe for years.”

Grayscale more Bitcoin than Binance

According to Bitcoin Treasuries, Grayscale is Bitcoin’s largest public HODL, having 634,256 BTC under management, or just over 3% of the total supply. With this, they are just slightly ahead of Binance.

However, the addresses of Grayscale’s Bitcoin wallets are not known to the public, unlike some other large entities such as Binance or Bitfinex.

Bitcoin is from the fund

Grayscale says they don’t lend, trade or do other crazy things with their cryptos. All Bitcoins in the Fund are owned solely by the Fund and no one else.

“Each Grayscale digital asset product is structured as a separate legal entity, a statutory trust for each separate asset product, and a limited liability company for each diversified digital asset product, sponsored or managed by Grayscale Investments, but ultimately owned by the product shareholders.”

To participate in the fund, you buy shares in the fund. Each share represents a proportional share of the Bitcoins that the fund manages. Currently it is around 0.00091502 BTC per share.

“For the avoidance of doubt, these digital assets are owned by GBTC and GBTC alone.”

Now 46% off Bitcoin from Grayscale

The image of GBTC, Grayscale’s stock, has been under pressure for some time. Since 2021, it has traded at a discount to the BTC spot price, a discount now approaching 46%. In other words, you are buying GBTC shares 46% below the real Bitcoin price.

Source: Coinglass

Discount indicates lack of demand for Grayscale’s product. You’d almost say we’d all be crazy not to jump on this one if it weren’t for the fact that GBTC is primarily for institutional investors who don’t want to invest directly in Bitcoin. Due to the high discount, there is speculation that Grayscale may be taken over.

“While this is a difficult time for many in crypto, I am very optimistic about the future of this industry, Grayscale’s business and the opportunities for investors.” tweeted Michael Sonnenshein, CEO of Grayscale on November 19.

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