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Grayscale Liquidation Could Unleash A Bitcoin Armageddon

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Grayscale Liquidation Could Unleash A Bitcoin Armageddon

The FTX Contagion effects do not even stop at the largest institutional Bitcoin product on the market, the Grayscale Bitcoin Trust (GBTC). As a result of the bankruptcy of Sam Bankman-Fried’s crypto exchange, the discount to the NAV of Grayscale’s GBTC fund has fallen to around -40%.

As recently as the end of 2020, GBTC was trading at a premium of +40%. However, in January 2021, the trend reversal occurred when Grayscale’s Bitcoin fund traded at a discount for the first time. Since then, GBTC has been on a downward slide.

Bitcoin GBTC. Source: CNN Business

GBTC’s largest owners include Cathie Wood’s ARK Invest (0.85%), Horizon Kinetics (0.34%), Simplify Asset Management (0.06%) Systelligence (0.04%), Parkwood (0.04%), Emerald Mutual Fund (0.03%) and Rothschild Investment (0.01%), according to CNN Business.

Doomsday for Bitcoin

Recent events have led Grayscale Bitcoin Trust to become potentially the single biggest risk to the Bitcoin market. As NewsBTC reported, Genesis Global had to pause all withdrawals for its lending business on Wednesday due to “unprecedented market turmoil.”

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This is concerning for the Grayscale Bitcoin Trust in that Genesis Global served as the liquidity provider for the trust. Genesis Global’s parent company is Digital Currency Group (DCG). This in turn is also the parent company of Grayscale.

Shortly after the Genesis announcement, Digital Currency Group clarified that the matter would have no impact on its own business. DCG stated that Genesis is not a service provider “for any” Grayscale product.

Furthermore, the company asserted that it does not lend, borrow, or pledge Bitcoin, and that its custodian – Coinbase – is prohibited from engaging in such activities. In addition, SEC and OTC markets reports and audited financial statements are filed.

Grayscale products continue to operate business as usual, and recent events have had no impact on product operations.

The assets underlying $GBTC and all Grayscale products remain safe and secure, held in segregated wallets in deep cold storage by our custodian Coinbase .

Still, the community is bellyaching. A dissolution of GBTC could mean Armageddon for Bitcoin. The collapse of Terra Luna, on the other hand, would have been fun.

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The Grayscale Bitcoin Trust currently holds 634,000 BTC. The Terra Luna Foundation “only” liquidated 80,000 Bitcoins, and still managed to crash the BTC price from $40,000 to $20,000.

As Ryan Selkis reported, DCG is in a liquidity squeeze. “Appears holding company’s (DCG) liquid assets are below liabilities. As a result, it looks like DCG is looking to raise outside funding”. However, this tweet is now deleted.

The Bitcoin community is now demanding proof that Grayscale actually holds roughly 634,000 BTC in reserve at Brian Armstrong’s Coinbase. However, neither Grayscale nor Coinbase have shown any reaction so far.

All that is currently available is a CSV file that is updated daily. As analyst Dylan LeClair explained, it should be relatively feasible to produce a proof of reserves if all BTCs are held at Coinbase.

Does anyone know of the addresses for the 630k BTC in $GBTC? Are there some form of proof of reserves and if no, why?

We have a fully transparent public ledger so we can audit this stuff.

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All I can find is a CSV file that updates daily. Why not publish the addresses?

— Dylan LeClair 🟠 (@DylanLeClair_) November 17, 2022

But criticism also heads towards the U.S. Securities and Exchange Commission. If chairman Gary Gensler had approved the conversion of GBTC into an ETF, the Armageddon scenario would not even exist.

Instead, Gensler preferred to reject spot Bitcoin ETFs and flood the market with paper BTC. The FTX fiasco may also contribute to the lack of approval for a spot ETF in the near future.

Meanwhile, Chris Burniske, partner at Placeholder and former crypto chief at ARKinvest, tweeted that fears surrounding the unwinding of GBTC and ETHE are unfounded, an example of hysteria.

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He retweeted Bob Loukas who wrote that the trust will not go away as it is a money printing machine.

They generate like $700m in fees and investors can’t stop it. […] They could borrow billions against that cash flow.

Also, You’re not killing the goose to save Genesis. They’re fire-walled.

At press time, Bitcoin investors seemed to agree with Chris Burniske. BTC remains in a wait-and-see mode.

Bitcoin price does not move much in the 1-day chart. Source: TradingView

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Massachusetts Senator Forwards Bill Aimed At Forcing Crypto Miners To Report Greenhouse Gas Emissions

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Massachusetts Senator Forwards Bill Aimed At Forcing Crypto Miners To Report Greenhouse Gas Emissions

On Dec. 8, 2022, three Democratic politicians from Massachusetts, Oregon, and California revealed legislation aimed at combatting “energy-intensive” cryptocurrency mining operations. The bill introduced by senator Ed Markey (D-MA) alleges that crypto mining “strains the grid” and the industry “undermines U.S. climate goals.”

3 U.S. Bureaucrats Believe Crypto Miners Need to Report Carbon Emissions and Environmental Assessments

Senators Ed Markey (D-MA), Jeff Merkley (D-ORE), and Jared Huffman (D-CA) have introduced a bill that would require “an interagency study on the environmental and energy impacts of crypto asset mining.” Markey’s press release concerning the “Crypto Asset Environmental Transparency Act” details that the U.S. Environmental Protection Agency (EPA) would lead the study.

Furthermore, the EPA would assess crypto mining activity in the U.S. and operations would be required to report greenhouse gas (GHG) emissions. Crypto mining companies required to report GHG emissions would be “operations that consume more than 5 megawatts of power,” the press release details.

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“Big-money [crypto mining] companies are undermining decades of progress in our fight against climate change by putting profits over the promise of our clean energy future – jeopardizing the reliability and safety of our grid in the process and making it all the more likely for utilities to raise energy prices on working families,” senator Markey said on Thursday.

Representative Jared Huffman said the bill would finally pull “the curtain back on this industry.” Huffman added:

The time for transparency, oversight, and accountability is now.

The bureaucrats’ bill aims to combat so-called climate change, a narrative that U.S. politicians and leaders worldwide have been pushing for years. Markey’s opinions follow a number of studies and research reports that indicate operations like bitcoin (BTC) mining are actually advantageous, not only for relieving the grids leveraged but also removing carbon emissions.

For instance, the environmental, social, and governance (ESG) analyst, Daniel Batten, published a report that claims bitcoin mining could eliminate the world’s carbon emissions by 5.32%. On Nov. 29, 2022, the Electric Reliability Council of Texas (ERCOT) published a report that shows bitcoin mining is beneficial to the Texas grid. ERCOT’s study indicates that bitcoin mining operations in Texas could curtail 1.7 gigawatts (GW) of energy during the Texas winter.

Bitcoin mining is also known to mitigate flare gas (the release of raw gas into the atmosphere) and landfill gas. In the press release published on Thursday, however, U.S. senator Merkley argued that “Crypto asset mining consumes massive amounts of electricity” and stressed “most of which is generated by burning fossil fuels.” However, various studies over the years indicate that a majority of bitcoin mining operations are driven by renewable energy sources.

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The bureaucrats’ act is endorsed by the Sierra Club, Earthjustice, Environmental Working Group, and Seneca Lake Guardian. “Digital assets that rely on proof-of-work are wasteful by design,” Scott Faber, the senior vice president for government affairs at the Environmental Working Group said in a statement. “Strong federal regulations must address” the situation, Earthjustice’s clean energy attorney Mandy DeRoche added.

Tags in this story

Bitcoin, Bitcoin Mining Operations, Bureaucrats, california, Carbon Emissions, climate change, climate crisis, Democratic politicians, Earthjustice, Ed Markey (D-MA), Energy, Environmental Working Group, EPA, Flare Gas, GHG emissions, greenhouse gas, grid, Jared Huffman (D-CA), Jeff Merkley (D-ORE), Legislation, Massachusetts, Mining Operations, oregon, renewables, Seneca Lake Guardian, Sierra Club

What do you think about the U.S. bureaucrats’ bill that aims to regulate crypto mining and force operations to report greenhouse gas emissions? Let us know what you think about this subject in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Is Bitcoin Bottom In? This On-Chain Condition Hasn’t Been Met Yet

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Is Bitcoin Bottom In? This On-Chain Condition Hasn’t Been Met Yet

A Bitcoin on-chain metric still hasn’t formed the same condition as in the previous bottom, suggesting that the current low may not be in yet.

Stablecoin Exchange Inflows (Top 10) Hasn’t Shown Any Spikes Recently

As pointed out by an analyst in a CryptoQuant post, the top 10 stablecoin exchange inflows saw a rise during the July 2021 bottom.

The “stablecoin exchange inflows (top 10)” is an indicator that measures the sum of the ten largest stablecoin transactions that are heading towards exchanges. The metric includes data of all types of stablecoins.

Since the top ten transfers are usually from the whales, this indicator can tell us whether whales are active on exchanges or not.

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Usually, investors shift to stables when they want to escape the volatility associated with most other cryptos. Once these holders feel that the prices are right to re-enter these markets, they buy into other coins using their stablecoins, thus providing a buying pressure to them.

When the value of the top 10 stablecoin exchange inflows is high, it means whales could be sending large amounts of stables to exchanges for buying other coins. Such a trend could therefore be bullish for the prices of cryptos like Bitcoin.

Now, here is a chart that shows the trend in this on-chain indicator over the last few years:

Looks like the value of the metric has been muted in recent days | Source: CryptoQuant

As you can see in the above graph, the stablecoin inflows (top 10) to spot and derivative exchanges have been displayed separately, since spot platforms are what investors use for converting their coins.

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It seems like when the Bitcoin bottom formed back in July 2021 during the mini-bear period of the time, the spot exchange version of the metric sharply rose up.

This implies that whales participated in some heavy buying during that time with their stablecoin reserves, paving way for a bullish reversal in BTC.

In recent weeks, the top 10 stablecoin inflows to spot exchanges haven’t shown any significant movements, which means whales aren’t providing any significant buying pressure yet.

If the past trend is anything to go by, this could be an indication that the current Bitcoin bottom still hasn’t formed.

BTC Price

At the time of writing, Bitcoin’s price floats around $16.8k, down 2% in the last week. Over the past month, the crypto has lost 18% in value.

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The below chart shows the recent trend in BTC:

The value of the crypto seems to have declined during the last couple of days | Source: BTCUSD on TradingView
Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com

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Analysis

Biggest Movers: LTC, ATOM Extend Declines, Hitting 10-Day Lows 

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Biggest Movers: LTC, ATOM Extend Declines, Hitting 10-Day Lows 

Litecoin fell for a third consecutive session on Thursday, as the token continued to move away from recent highs. Cryptocurrencies have been mostly lower in recent days, as traders continue to fear a global recession. Cosmos also remained in the red during today’s session.

Litecoin (LTC)

Litecoin (LTC) dropped to a ten-day low on Thursday, with the token falling for a third straight session.

Following a high of $79.20 on Wednesday, LTC/USD moved to a low of $74.82 earlier in the day’s session.

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As a result of this, the token fell to its lowest point since November 29, when prices hit a bottom of $73.39.

LTC/USD – Daily Chart

Looking at the chart, it appears that litecoin bears are hoping to push prices towards a floor at $73.00.

This seems a possibility, especially with the 14-day relative strength index (RSI) fast approaching a floor of its own.

The index is currently tracking at 57.10, and seems to be moving towards a support point of 53.00.

Cosmos (ATOM)

Another notable token on Thursday has been cosmos (ATOM), which fell to a ten-day low earlier in the day.

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ATOM/USD fell to a bottom of $9.52 on Thursday, before bulls reentered the market and bought the recent dip.

Today’s bottom saw cosmos trade at its lowest level since November 28, which was the last time the token hit its floor at $9.45.

ATOM/USD – Daily Chart

As of writing, ATOM has mostly rebounded, and is currently trading at the $9.71 level.

In addition to this, the RSI has bounced from a floor of its own at 39.50, and is currently tracking at 41.40.

Should momentum continue in an upward direction, ATOM bulls will likely target a move above the $10.00 mark.

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Do you expect cosmos to move above $10.00 this week? Let us know your thoughts in the comments.

Eliman Dambell

Eliman brings an eclectic point of view to market analysis, he was previously a brokerage director and retail trading educator. Currently, he acts as a commentator across various asset classes, including Crypto, Stocks and FX.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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