Why won’t Grayscale accept GBTC’s 633,600 bitcoins, according to independent research?
An independent analyst has spent days looking through the blockchain to independently verify Grayscale Bitcoin Trust’s (GBTC) holdings since the digital asset management company won’t show proof of reserves.
Ergo, an analyst at OXT Research confirmed on November 23 that the GBTC owned roughly 633,000 bitcoins using on-chain forensics.
BTC counts down $16,535
kept by Coinbase Custody, its custodian.
Since FTX’s demise, other exchanges and digital asset managers have been under growing pressure to demonstrate that they actually have the cash they claim to. A major black swan event would be the liquidation of GBTC’s holdings or its collapse. Given that both Genesis Global Trading and Grayscale are subsidiaries of the troubled cryptocurrency lender Digital Currency Group, there are more reasons to be concerned about their affiliation.
Following Coinbase’s attestation of its holdings earlier this week, the independent verification of its holdings will instill some confidence in investors in the product and the industry at large.
After Grayscale withheld on-chain proof of reserves on November 18 because of security concerns, Ergo tweeted on November 20 that they were investigating GBTC’s holdings.
Ergo was able to use public data and chain forensics to trace a balance of around 317,705 BTC in 432 addresses to potential GBTC custody activity by knowing that the majority of the assets had just been transferred from Grayscale’s prior security provider, Xapo, to Coinbase Custody.
Related: Bitcoins will vanish from the face of the earth in the coming years!
Ergo notes that while the analysis “certainly includes false positives and negatives,” the addresses they found contain holdings of bitcoin that are remarkably similar to what GBTC claims to have. To find the remaining BTC held by GBTC, Ergo had to “scan the blockchain” in order to find additional addresses that fit the profile of those they initially found.
Ergo, it was added, “We have confirmed the holdings.”
This begs the question of why Grayscale refuses to reveal the value of its on-chain holdings.
“Following the discovery of GBTC’s January 2017 Securities and bitcoins (SEC) filing, which stipulates that the custodian “may not divulge such [public] keys to the sponsor, trust, or any other individual or entity,” Twitter user Skyquake-1 provided a potential solution.
Many people in the community have praised Ergo, including Ceteris from the crypto research firm Delphi Digital, who retweeted the findings and added:
Thus, it is a treasure.
Since the repercussions of FTX, the Twitter community has been a consistent source of information about the cryptocurrency market. Elon Musk and Brian Armstrong, the CEO, and co-founder of Coinbase, have even commended them for their work.
