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I've been thinking whether it's worth thinking about arbitraging $GBTC. While the 45% discount sounds attractive, here are my concerns: 1. They absolutely refused to provide the one thing that would allay most (but not all of my) fears: the wallet address.

The explanation provided sounds very forced and unconvincing. I am sure experts could figure out quite easily how to provide it without endangering security. 2. The custodian is very unreliable 3. The auditor is very unreliable 4. The ownership structure is complicated
and does not inspire confidence. Why does it need to be so convoluted? A bit of a red flag. 5. We have seen that major actors in the crypto space are actually bare faced crooks. @SBF is nothing but a criminal
and birds of a feather tend to stick together. Barry Siebert and the rest at Grayscale could be just as criminal. No idea if they are. But they could be. Why have they waited so long and for the discount to become so large before even attempting to allay fears? Incompetence?
Or fraud? Who knows!? 6. Even if all the $BTC is there, there can be no guarantee that it has not been pledged off blockchain, via a simple swap contract or some similar (legacy) legal arrangement.
This is something that is very much underappreciated by the crypto community: would it be legal to pledge a wallet or its contents off blockchain? Of course it would be! If the pledgee accepts it, anything can be pledged. This leaves us with a circular argument:
it cannot be definitively proven that the $BTC are unencumbered. Just impossible. And even if they are, an audit of the wallet only proves what is there THAT SECOND. How do we know that BTC has not been used out of it for pledge purposes and then returned?
Or that they won't be taken out again in a minute? Could it be that they refuse to provide the address because they don't want you to see the movements in and out? No idea. But possible. Even if all those possible transactions ultimately proved illegal, it would take many,
many years of legal battles to establish it. Lawyer fees would ensure that you don't recoup anywhere near full value. And in meantime, your investment would be frozen. Discount 4-5 years at 5-6% and a recovery rate of 80% and a 45% discount today does not look attractive at all.
I have no idea if any of this is happening. None. Just trying to look at worst case scenarios to establish the current risk/reward. Conclusion: not good enough at 45%. 75-80% discount, I would look again.
Nick Givanovic
Ex JPM, Salomon & HF principal. Rates trader. I don't tweet at you: chill. Non bene pro toto libertas venditur auro.
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