Grayscale Bitcoin Trust: the free money machine that went into reverse
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A lucrative arbitrage opportunity formed the foundation of much of the cryptocurrency industry. When it turned bad, it brought the whole house of cards down with it.
The subscription price is worth it to read about this flim-flammery so well explained by you, thank you! I do hope you write a book on all this greed and scamming, down the track.
I think you might of missed something in your ETF explanation though. So the way an ETF tracks with its underlying asset isn't giving individuals who own shares to be able to redeem those shares for the underlying asset and vice versa. From my understanding is that the ETF delegates that to a specific person called an AP.
I could be wrong though. I think this was an important enough point to make because an AP a) has to be qualified and registered with the dtcc b) has to be able to actually participate in the underlying market (crypto).
So the DCG already has an arm that has the ability to do that and given that DCG has been buying up GBTC shares and that they bailed out genesis with 700 million of those shares I think they're intentions are more nefarious.
So GTBC gets ETF status -> they go hey we already have an AP in mind -> they go to their sister company who already has shares -> GTBC trades their bitcoin to sister company for GTBC shares which they then burn -> AP then goes to market and sells said bitcoin driving the price down 1-to-1with GTBC and pockets the difference.
So this allows them to essentially sell the underlying assets of the customer(much like SBF did) and to do it legally (much like SBF didn't).
Really the only reason I'm convinced is a lot of time these people turn out to be megalomaniacs.
Anyway you're way more knowledgeable about this than I am so I'm probably wrong. Thank you for your hard work you do
I understand why GBTC fell into a discount once it became clear that they were never going to get the ETF conversion and/or they started playing games with proof of reserves, but can you explain why it was ever trading at a premium? You implied it was *because* there was no redemption mechanism but that doesn't make sense to me.
Great article! What I still don’t understand is the whole ETF issue. The reason Grayscale supposedly wants to convert to an ETF is so that it tracks Bitcoin price more closely. The way this is accomplished is by allowing redemptions for bitcoin. Why can’t they just allow redemptions now while it’s trading OTC. What am I missing?
This was very well written. It is a very complex situation, but I was able to follow the explanation easily.
I'm gonna need Costco quantities of popcorn for all this.
Great post!
The subscription price is worth it to read about this flim-flammery so well explained by you, thank you! I do hope you write a book on all this greed and scamming, down the track.
Hi Molly love your work.
I think you might of missed something in your ETF explanation though. So the way an ETF tracks with its underlying asset isn't giving individuals who own shares to be able to redeem those shares for the underlying asset and vice versa. From my understanding is that the ETF delegates that to a specific person called an AP.
https://www.blackrock.com/au/intermediaries/ishares/authorized-participants-and-market-makers
I could be wrong though. I think this was an important enough point to make because an AP a) has to be qualified and registered with the dtcc b) has to be able to actually participate in the underlying market (crypto).
So the DCG already has an arm that has the ability to do that and given that DCG has been buying up GBTC shares and that they bailed out genesis with 700 million of those shares I think they're intentions are more nefarious.
So GTBC gets ETF status -> they go hey we already have an AP in mind -> they go to their sister company who already has shares -> GTBC trades their bitcoin to sister company for GTBC shares which they then burn -> AP then goes to market and sells said bitcoin driving the price down 1-to-1with GTBC and pockets the difference.
So this allows them to essentially sell the underlying assets of the customer(much like SBF did) and to do it legally (much like SBF didn't).
Really the only reason I'm convinced is a lot of time these people turn out to be megalomaniacs.
Anyway you're way more knowledgeable about this than I am so I'm probably wrong. Thank you for your hard work you do
I understand why GBTC fell into a discount once it became clear that they were never going to get the ETF conversion and/or they started playing games with proof of reserves, but can you explain why it was ever trading at a premium? You implied it was *because* there was no redemption mechanism but that doesn't make sense to me.
Great article! What I still don’t understand is the whole ETF issue. The reason Grayscale supposedly wants to convert to an ETF is so that it tracks Bitcoin price more closely. The way this is accomplished is by allowing redemptions for bitcoin. Why can’t they just allow redemptions now while it’s trading OTC. What am I missing?
Thanks Molly-always enjoy reading you. Please keep up the fantastic explanatory writing !!