Economist and chief global strategist, Peter Schiff, shared that “Grayscale Bitcoin Trust (GBTC) was one of the main reasons Bitcoin rallied to $69K.” GBTC advertised on CNBC to get investors to pay huge premiums to NAV. Following that, Grayscale issued new shares at NAV (Net Asset Value) to institutions, then used the proceeds to buy even more Bitcoin (BTC), causing the price to rise even further.
GBTC collects money from institutional investors, generally in US dollars (USD), and used it to purchase BTC directly. In addition to buying BTC from Grayscale, users are also buying shares of Grayscale.
In detail, Grayscale shilled BTC on CNBC and boosted BTC’s NAV. Then it induced individual investors to pay high premiums to NAV. The company then issued new shares to institutions at the net asset value. The proceeds were then used to purchase more BTC, pushing the price even higher.
The parent firm of both the problematic Genesis and the GBTC is Digital Currency Group (DCG). As a result of FTX pressure, Genesis is putting pressure on its parent firm, DCG, endangering GBTC.
GBTC, the largest institutional Bitcoin platform, has recently reached a new low in terms of NAV. GBTC’s current discount or premium to NAV is -42.60% as of November 21, 2022.
There is a compelling argument that 3AC, Genesis, Grayscale, GBTC, and DCG were all working together to maximize profits by inflating demand and price for GBTC.
Grayscale has refused to provide Proof-of-Reserves. Consequently, doubts have emerged in the crypto community concerning the whereabouts of the BTC that are meant to underpin GBTC.
Grayscale has said publicly that it would neither give Proof-of-Reserves nor disclose the on-chain wallet. Grayscale’s twitter thread recently cited security issues in releasing the wallet(s). However, neglecting to provide proof has only increased suspicion about insufficient backing.
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Source: Cryptocurrency - investing.com
