Questions Raised As Grayscale Reportedly Moved 21K BTC on Dec 31st

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Data suggests the asset manager sent 1K+ BTC to Coinbase.

Grayscale Investments, an American digital asset manager and a Digital Currency Group (DCG) subsidiary, is reported to have moved about 21K BTC on Dec 31st. The assets were moved at an on-chain realized loss of 60%, significantly impacting the SOPR metric, as it declined to 0.93. While it has raised eyebrows, investigations suggest it was a harmless fund flow.

CryptoQuant Chief Ki Young Ju recently highlighted the movement having investigated Grayscale-affiliated addresses using Breadcrumbs. “Grayscale moved 21K $BTC on Dec 31st, 2022, with a 60% on-chain realized loss,” Ki revealed in a tweet. Grayscale likely moved the funds to different cold wallets for security reasons, said the CryptoQuant chief calming investor concerns. Notably, about 1k BTC flowed into Coinbase in what Ki describes as payment of management fees.

Grayscale moved 21K $BTC on Dec 31st, 2022, with a 60% on-chain realized loss.

It’s likely just switching to new cold wallets for security reasons. Over 1k BTC flowed into the Coinbase exchange, possibly for management fees.

Full Report by @jjcmoreno 👇https://t.co/pbDlocTpaE pic.twitter.com/2d2ImZW8SY

— Ki Young Ju (@ki_young_ju) January 11, 2023

According to the full report shared by Ki, CryptoQuant witnessed an unusually sharp drop in the Spent Output Profit Ratio (SOPR) indicator, which is used to determine the degree of profit or loss investors face on an asset by assessing the values of tokens moved on-chain. The SOPR dropped to 0.93 on Dec 31st – a level that is historically associated with market bottoms.

Investigations from CryptoQuant ensued, with findings showing that the drop was caused by Grayscale’s movement of 21K BTC. The report sparked concerns among investors, especially considering Grayscale’s entanglement with the issues surrounding DCG and sister company Genesis. Notwithstanding, CryptoQuant believes it was only a harmless fund flow.

Most of the assets were moved to other Grayscale wallets, with 1K BTC transferred to Coinbase. As the CryptoQuant chief noted, the report asserts that the firm was likely switching to other wallets for security purposes, and the 1K BTC sent to Coinbase is likely for management fees. Grayscale still holds 631.6K BTC ($11.49B) on its GBTC fund, which is trading at a discount rate of 38.79%.

Grayscale Caught in Between the DCG and Gemini Issue

Meanwhile, the DCG issue with Gemini persists, with DCG Chief Barry Silbert recently replying to Cameron Winklevoss’ latest letter to the DCG Board on Tuesday. Winklevoss had called for Silbert’s resignation as CEO. Silbert’s response to Winklevoss refuted accusations the latter made, bordering on accounting fraud and misrepresentations.

Recall that Winklevoss had also previously accused Silbert of gambling away Genesis’ funds on “kamikaze Grayscale NAV trades,” leading to losses for the lending firm and an inability to process customer withdrawals and pay back the $900M loan owed to Gemini. Winklevoss gave Silbert Jan 8th as the deadline to resolve the issue, sparking fears that DCG might liquidate Grayscale’s trusts to meet the demands. 

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