Digital asset firm Grayscale refuses to provide proof of reserve for the Grayscale Bitcoin Trust (GBTC). An independent analyst, on the other hand, spent days surfing the blockchain trying to prove the fund’s reserve on his own.
Using on-chain data, OXT Research analyst Ergo confirmed that GBTC holds approximately 633,000 Bitcoins (BTC) on Coinbase Custody as of November 23.
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? pic.twitter.com/pGMzgomFCp
— ∴Ergo∴ (@ErgoBTC) November 23, 2022
Since the collapse of FTX, the pressure to prove reserve on exchanges and digital asset managers has increased. The collapse of GBTC or the conversion of its reserve into cash would be a serious black swan event. Grayscale’s relationship with the troubled crypto lender Genesis Global Trading is also raising concerns. Both companies are subsidiaries of the Digital Currency Group.
Independent verification of GBTC reserve will increase the confidence of both the product’s investors and the industry in general.
After Grayscale stated it won’t provide proof of on-chain reserve, citing security concerns, Ergo is underhanded. Ergoannounced on November 20 that it is examining GBTC’s reserves.
Knowing that most of Grayscale’s assets were transferred from its previous provider, Xapo, to Coinbase Custody, Ergo was able to detect 317,705 BTC at 432 addresses using blockchain data and public information.
Ergo had to scan the blockchain thoroughly to find the remaining BTCs. detected in the following at addresses Almost identical amounts were identified to what GBTC claims to have in its reserve.
Announcing that it has confirmed the reserve, Ergo added:
“This begs the question, why does Grayscale refuse to verify the on-chain reserve?”
Twitter user Skyquake-1 answered the question by referring to GBTC’s filing with the US Securities and Exchange Commission (SEC) in January 2017. In the application, it is stated that the party providing the custody service cannot disclose any key information about the Sponsor, Trust and other individuals and entities.
— illiquidity providoooor (@skyquake_1) November 22, 2022