BlockFi is one of the main bagholders of Grayscale Bitcoin trust. They attracted Bitcoin deposits promising some yield, then subscribed to $GBTC in kind, hoping to dump their bags for cash six months later, rake in the Grayscale premium, buy back Bitcoins, and pay out depositors.
https://twitter.com/Bitfinexed/status/1397359229846048768
In doing so they acted like a plain legacy bank, borrowing for 5% and lending for 30%. And like a bank, they borrowed liquid assets and invested into illiquid assets. The prize was the liquidity premium.
The problem was that the $GBTC premium didn’t scale - you see that often in
The problem was that the $GBTC premium didn’t scale - you see that often in
... the real world, where hedge funds close their fund to new investors, or straight-out pay back all outside investors and just keep managing their own money (which they accumulated from management and performance fees). That’s because market inefficiencies exist as long as not
... too many people try to exploit them. That’s why when you find an arbitrage opportunity, you shit up & milk it while the going’s good.
BlockFi went in all guns blazing, with a cohort of other arbitrageurs, to milk a cow for billions when the cow could only give a few million.
BlockFi went in all guns blazing, with a cohort of other arbitrageurs, to milk a cow for billions when the cow could only give a few million.
Now everyone’s stuck gripping onto a dry, wrinkled, milked-out teat, and the floor has suddenly disappeared, and the poor $GBTC cow is floating in the ether, a thousand feet up in the air, with a crowd of “smart money” arbitrageurs holding on for their lives. BlockFi among them.
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