Since FTX’s demise, other exchanges and digital asset managers have been under growing pressure to show 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 if that were to happen.
Why An Independent Study Into GBTC?
To find out the actual position of GBTC, an independent analyst has spent days searching through the blockchain to independently verify Grayscale Bitcoin Trust’s (GBTC) holdings, since the digital asset management company is refusing to provide evidence of reserves.
By using on-chain forensics, the OXT Research analyst Ergo was able to determine that as of Nov. 23, the GBTC owned roughly 633,000 Bitcoin, which were kept by its custodian, Coinbase Custody.
Concerns have been heightened due to Grayscale’s relationship with embattled crypto lender Genesis Global Trading, due to the fact that both are divisions of the venture capital firm Digital Currency Group.
Following Grayscale’s Nov. 18 decision to withhold on-chain proof of reserves due to security concerns, Ergo tweeted on Nov. 20 that they were investigating GBTC’s holdings.
Using public data and chain forensics, Ergo was able to link a balance of about 317,705 BTC in 432 addresses to likely GBTC custody activity. This was possible because Ergo was aware that the majority of the assets had recently been moved from Grayscale’s previous security provider Xapo to Coinbase Custody.
Ergo notes that while the analysis “certainly includes false positives and negatives,” the addresses they found contain holdings of BTC that are almost exactly 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 first found.
Twitter Users Have Their Say
While announcing that they had confirmed these holdings, Ergo posed the question; why does Grayscale refuse to disclose their on-chain holdings?
A potential solution was provided by Twitter user Skyquake-1, who located a January 2017 Securities and Exchange Commission (SEC) filing from GBTC that stipulates that the custodian “may not divulge such [public] keys to the Sponsor, Trust or any other individual or entity.”
Many others in the community have praised Ergo, including Ceteris from crypto research firm Delphi Digital, who retweeted the findings and added;
“Ergo is a treasure.”
Many other users on Twitter lauded Ergo for their extensive research and for helping to promote transparency in the crypto space when it’s needed most.
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