With digital asset management firm Grayscale refusing to provide proof of its Grayscale Bitcoin Trust (GBTC) reserves, an independent analyst has spent days monitoring the blockchain to independently verify its holdings..
OXT Research analyst, Ergo, used on-chain forensics to confirm that, as of November 23, the GBTC holds approximately 633,000 Bitcoin (BTC) in the hands of its custodian, Coinbase Custody..
The Grayscale G(BTC) Coins Part 2
In this analysis we use additional on-chain forensics to CONFIRM the approximate 633k BTC balance held by G(BTC) at Coinbase Custody.
Which begs the question, why does Grayscale refuse to disclose their on-chain holdings? https://t.co/lj7KH5thIf pic.twitter.com/pGMzgomFCp
— ∴Ergo∴ (@ErgoBTC) November 23, 2022
G Coins(BTC) in Grayscale Part 2
In this analysis we use additional on-chain forensics to CONFIRM the approximate balance of 633,000 BTC held by G(BTC) in Coinbase Custody. Which leads us to wonder, why is Grayscale refusing to disclose its on-chain holdings? https://t.co/lj7KH5thIf pic.twitter.com/pGMzgomFCp
Since the FTX collapse, pressure has increased on other exchanges and digital asset managers to prove they have the funds they claim. A GBTC collapse, or the liquidation of its holdings, would be a serious black swan event. Concern has risen over Grayscale’s relationship with embattled cryptocurrency lender Genesis Global Trading, both of which are subsidiaries of venture capital firm Digital Currency Group..
Independent verification of your holdings will provide a certain level of confidence to investors in the product and in the sector as a wholeand comes after Coinbase attested to the holdings earlier in the week.
Ergo announced that it was investigating GBTC’s holdings in a Tweet November 20 after Grayscale cited security concerns as its reason for withholding proof of on-chain reserves on Nov. 18.
Knowing that most of the assets had recently been transferred from Grayscale’s previous security provider, Xapo, to Coinbase Custody, Ergo was able to use public data and on-chain forensics to attribute a balance of about 317,705 BTC across 432 addresses to likely GBTC custodial activity..
To find the rest of the BTC held by GBTC, Ergo had to “scan the blockchain” to find additional addresses that matched the profile of the ones it originally found, noting that while the analysis “certainly includes false positives and negatives,” the addresses it found contain almost identical BTC holdings to the ones it found. that GBTC claims to have.
Announcing that they had confirmed the holdings, Ergo added:
“Which raises the question, why is Grayscale refusing to disclose its on-chain holdings?”
Twitter user Skyquake-1 offered a possible answer, having reviewed GBTC’s January 2017 Securities and Exchange Commission (SEC) filing, which states that the custodian “may not disclose such keys [públicas] sponsor, trustee or any other individual or entity”.
— illiquidity providooor (@skyquake_1) November 22, 2022
Turns out it was part of the $GBTC prospectus. They just aren’t allowed to say it lol https://t.co/8inudjBWUe pic.twitter.com/WxlWjAkmP
Ergo has received praise from many in the communityincluding Ceteris of cryptocurrency research firm Delphi Digital, who retweeted the analysis and added:
“Ergo is a treasure”
The Twitter community has been a constant source of information about the cryptocurrency industry, especially since the fallout of FTX.and has even received praise from Coinbase CEO and co-founder Brian Armstrong and Elon Musk for his efforts.
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