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1/ 90% of crypto’s market carnage last year ties back to the SEC’s utter incompetence and prioritization of impossible technical compliance over investor protection. twitter.com/i/web/status/1…
2/ I’m talking of course about the spot ETF refusals and the Grayscale products, which are “SEC Reporting” Trusts attempting to convert to ETFs, but blocked on specious technical grounds. Famously: spot markets are “not regulated” but SEC is ok with those markets’ derivatives.
3/ This paved the way for the GBTC trade: investors created GBTC shares with Bitcoin due to imbalances in demand for GBTC shares vs spot BTC.
For a while, GBTC had a premium that savvy investors could harvest in return for creating new shares. 3AC and BlockFi did this in size.
For a while, GBTC had a premium that savvy investors could harvest in return for creating new shares. 3AC and BlockFi did this in size.
4/ When the premium flipped to a discount some investors were caught offsides. And some - who had slammed the GBTC trade with leverage - had underwater GBTC shares pledged as collateral to the same Grayscale affiliate that lent to these investors AND served as Grayscale’s broker.
5/ GBTC shares were Schrödinger’s collateral. Impaired only if you looked in the box and had to sell them…they continued to be backed 1:1 by the Bitcoin that created them. But SEC rules and utter idiocy prevented investors from converting back to those same locked Bitcoin.
6/ Genesis was the only lender that would treat underwater GBTC shares as good collateral - because their sister company Grayscale is the only legal entity that can trigger redemptions for the Trust’s Bitcoin.
Genesis had incentives to make risky loans to GBTC shareholders.
Genesis had incentives to make risky loans to GBTC shareholders.
7/ Again, because the SEC is a sham institution with no real value to American investors, this setup was entirely legal. Still is.
And again, the SEC is blocking the fix for all impaired GBTC investors AND that is the only thing keeping Grayscale and DCG alive right now.
And again, the SEC is blocking the fix for all impaired GBTC investors AND that is the only thing keeping Grayscale and DCG alive right now.
8/ SEC policies hurt GBTC investors to the tune of $6 billion while enriching Grayscale and the DCG parent to the tune of $600 million in annual revenue that CANNOT decline as no investors can redeem funds.
But it, of course, gets worse…
But it, of course, gets worse…
9/ The GBTC creditor relationships, and the incentives they created for risky Genesis loans, directly led to the blowups of 3AC and BlockFi. Suddenly those bankrupt creditors flipped from golden geese for DCG-Genesis to bombs that blew up Genesis’s balance sheet last spring.
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