Grayscale Bitcoin Trust (GBTC) Serious Vulnerability Disclosed by Analyst

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Fri, 06/12/2020 - 11:51
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Vladislav Sopov
Grayscale Investments is pioneering providing exposure to digital assets without purchasing crypto tokens. But its manner of operation raises concerns
Grayscale Bitcoin Trust (GBTC) Serious Vulnerability Disclosed by Analyst
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Trader, analyst and investor Qiao Wang has revealed a weak point in the manner of operations demonstrated by Grayscale Investments with their popular Bitcoin (BTC) trust. He highlighted that it lacks the significant element of a security mechanism.

Where is the redemption?

Mr. Wang announced that Grayscale Bitcoin Trust (GBTC) investments lack the mechanism of redemption, i.e. the repayment by the issuer to the holder of securities before their maturity date. Typically, investors can redeem (return to cash) his/her investments partially or in full.

Qiao Wang claims GBTC has no redemption mechanism
Image via Twitter

But that doesn't work with Grayscale Bitcoin Trust (GBTC), Mr. Wang concludes. As a result, the instrument of pegging the NAV (net assets value) to the quantity of GBTC stocks available for over-the-counter sale is broken.

So, Grayscale Investments can trade its products at a persistent discount to the NAV. Prominent traditional asset ETFs that the GBTC is commonly compared to, don't behave in this way.

Qiao Wang outlined that until this mechanism is built, GBTC investors are no more than sponsors of the Grayscale team, since:

Without the the ability to redeem, you are just donating your money

Controversial instrument

Grayscale has been among the most important newsmakers in the crypto segment in Q1-Q2, 2020. It was reported that in the fourth Bitcoin (BTC) epoch, since May 10, 2020, Grayscale has purchased more Bitcoins (BTC) than all miners around the globe have managed to collect.

Despite offering stocks of trusts based on Bitcoin Cash (BCH), XRP, ZCash (ZEC), Horizen (ZEN), Litecoin (LTC) and Ethereum Classic (ETC), Grayscale Ethereum Trust (OTCQX: ETHE) is its most popular product.

Its stocks are pumping strongly. As every stock is only 0.09 ETH , investors are buying them with a 730% premium.

This euphoria has been criticized by the blockchain analytical community. It was highlighted that attempts to leverage Ethereum (ETH) price movement via such an exotic vehicle has no benefits in terms of liquidity influx or taxation regime.

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About the author

Blockchain Analyst & Writer with scientific background. 5+ years in IT-analytics, 2+ years in blockchain.

Worked in independent analysis (Crypto Briefing) as well as in start-ups (Swap.online, Monoreto, Attic Lab etc.)

2,500,000 Ethers Locked in Ethereum 2.0 Deposit Contract as ETH Rejected From $1,250

News
Fri, 01/15/2021 - 18:02
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Vladislav Sopov
Ethereum 2.0 enthusiasts deposited whopping sum in its contract launched six weeks ago
2,500,000 Ethers Locked in Ethereum 2.0 Deposit Contract as ETH Rejected From $1,250
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While crypto markets are trying to get out of the most painful correction in this bullish cycle, the Ethereum 2.0 deposit contract accomplishes another crucial milestone.

ETH2 deposit contract surpasses $3,000,000,000 level

According to leading Ethereum network observer Etherscan, the Ethereum 2.0 deposit contract (0x00000000219ab540356cBB839Cbe05303d7705Fa) allocated more than 2.5 million Ethers. New 32-ETH stakes are transferred to it every minute.

ETH2 deposit contract breaks above $3B
Image by Etherscan

As the correction of the Ethereum (ETH) price ended, ETH is changing hands at $1,225: the $1,250 level was too difficult for bulls to conquer. Meanwhile, even at press time, it is worth almost $40,000 to join the club of Ethereum 2.0 stakers.

Therefore, the USD-denominated value of assets locked in the contract surpassed $3 billion for the first time ever and keeps surging.

It should be noted that Ethereum 2.0’s deposit contract went live on Dec. 1, 2020, heralding the start of ETH2 Pase Zero or Beacon Chain, the inaugural stage of Ethereum 2.0.

Ethereum 2.0 “entry tickets” become really expensive

At press time, more than 52,267 addresses transferred money to the deposit contract.

Ironically, Black Thursday in Crypto (March 13, 2020) was the most convenient time to join Ethereum 2.0 staking with Ether at $95. Today, Ethereum (ETH) enthusiasts should pay 13 times more to have a minimum amount of Ethers required for staking.

Ethereum 2.0 is a proof of stake (PoS) iteration of the Ethereum (ETH) protocol. It replaces mining by staking and splits the whole Ethereum (ETH) network into several interconnected sub-chains (shards).

According to Staking Rewards analytical dashboard, annualized rewards for ETH staking are estimated between 10.4 and 10.6 percent.

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About the author

Blockchain Analyst & Writer with scientific background. 5+ years in IT-analytics, 2+ years in blockchain.

Worked in independent analysis (Crypto Briefing) as well as in start-ups (Swap.online, Monoreto, Attic Lab etc.)