6 ms·

The free money machine that went into reverse: Grayscale Bitcoin Trust

100 points by belltaco 4y ago

ptero 4y ago
The article gives a good overview but is a bit on a sensationalist side with the presentation. The way I understand the situation (and I am not a expert, would love to be corrected): 1. GBTC was set up to allow people, who did not want to set up a cold storage, exchange or similar crypto mechanisms to buy a BTC proxy by buying shares of GBTC, which would buy the corresponding amount of Bitcoin. It was convenient, other options were difficult, crypto was hot, so GBTC traded, on a secondary market, with a premium to the underlying BTC it held. It also charged noticeable fees (which also allowed the company to operate without FTX style financing). 2. Where there is a price mismatch, there is arbitration. Sophisticated teams did leveraged arbitration on BTC vs GBTC and got a lot of money out of thin air. But all schemas like this work until they do not. At some point, GBTC premium on the secondary market turned into discount and people doing arbitration lost lots of money. I cannot shed too many tears for them: investment is risky and those were very sophisticated investors who had to know that arbitrage sometimes flips. Win some, lose some. 3. All that does not mean that people who invested in GBTC (bought shares through their traditional brokerages) got swindled, FTX style. GBTC still trades on secondary market. Any broker would be happy to let you buy or sell it. Like any closed-end mutual fund, its price may be higher or lower than underlying, which adds a little extra volatility (but nothing compared to the volatility of the underlying Bitcoin). But folks who decided they do not want GBTC can sell anytime and get dollars back. 4. It is useful to keep timeline in mind. If there is any whiff of the exchange or trader insolvency, people will pull the money in the matter of days; more likely hours and minutes. GBTC went from premium to discount about 1.5 years ago. If I wanted BTC today I would not buy GBTC; it is, says me, not the best option. However, I do not think it is going to collapse due to a fraudulent activity or creative financing. My 2c.
- thaumasiotes 4y ago
  > GBTC went from premium to discount about 1.5 years ago. If I wanted BTC today I would not buy GBTC; it is, says me, not the best option. The discount doesn't matter so much to that. If the discount rate stays constant, then GBTC is an equally good investment as any other exposure to bitcoin - when BTC rises 50%, GBTC will also rise 50%.
  - dragontamer 4y ago
    > If the discount rate stays constant However, the discount rate is not constant. It was a premium a year ago (+10% ish), and now it is a discount (-50%). GBTC goes up and down based off of rumors of Gemini bankruptcy. Genesis will skyrocket if the bankruptcy rumors turn out false. Otherwise, GBTC may further collapse.
- vgatherps 4y ago
  If it can flip, it’s not really an arbitrage, but a bet that you’ll be able to exit the trade before it does flip or borrow costs kill you.
  - vba616 4y ago
    If it's a permanent profit source, then it can't be an arbitrage either, can it? If two things are theoretically supposed to be the same, and they never converge, then the claim that they are the same seems dubious.
    - freeone3000 4y ago
      They're not the same. GBTC traded at a premium because custodianship of bitcoin is a service which could provide value. Currently the consensus view is that this value is negative -- maybe people don't trust GBTC in particular, maybe people don't want to trade a BTC derivative on regulated markets, maybe custodianship isn't worth as much as they're charging after all. But it's not exactly the same product, the same as a cash settled silver futures contract and holding silver in your basement are not the same product.
      - vba616 4y ago
        It's obvious it's not exactly the same product. The definition of arbitrage is what's not mutually understood. Like the "is Pluto a planet" argument. Say that your position is that only arbitraging between GBTC and GBTC on different exchanges is really arbitrage. Well, what if that doesn't converge? There has to be a difference in the first place, and some uncertainty. So if "exactly the same product" doesn't converge, then you can say that it isn't exactly the same after all. Which means that the definition of "same", however you choose, must be a bit arbitrary. Definitions are arbitrary, but I think there are objectively bad definitions, which are so flexible that they can include or exclude everything or that definitely do include or exclude everything.
        vgatherps 4y ago
- csomar 4y ago
  > Sophisticated teams did leveraged arbitration on BTC vs GBTC and got a lot of money out of thin air. But all schemas like this work until they do not. At some point, GBTC premium on the secondary market turned into discount and people doing arbitration lost lots of money. This part doesn't make sense and makes me think the article is just random blurb. If you shorted GBTC and bought BTC during the premium and held until this point: You'll be profitable to your neck. Actually, you'll drown in profit. Not only you collected the premium but also now you get to collect the discount. Of course, someone might have mismanaged the trade. That's trading: It's not about "predicting" the outcome, it's more about managing the money flow. But the trade was profitable. It still is. The arbitrage is there if you are patient.
social_quotient 4y ago
Kinda lost me at the first excerpt “A lucrative arbitrage opportunity formed the foundation of much of the cryptocurrency industry. When it turned bad, it brought the whole house of cards down with it.” Total btc market cap still 450bn and total crypto market cap still 1 trillion. And it would be really myopic to say financial arb formed the foundations of “much” of the crypto industry.
- bruce511 4y ago
  I am not that into crypto, so forgive me for being naive, but I think there's a distinction being made here between crypto the technology and crypto the industry. So Bitcoin is the tech. You mine it, buy it, sell it, spend it, whatever. The Bitcoin price is what it is, it goes up and down. The industry are the financial instruments - derivatives if you like - of the tech. So no longer nitcoin, but rather shares in a company holding Bitcoin. Or exchanges where you deposit your Bitcoin etc. Most of industry offers a service, providing things not easily done with your Bitcoin sitting in your wallet at home. For this service they take a fee. This is the arbitrage in question, and since pretty much all financial companies, not just crypto, leverage this "Access for a Fee" (AfaF) approach, in a sense arbitrage is the root of the "financial industry" (not just crypto) Not surprisingly riles and regulations happened to traditional finance companies. An effort has been made to protect the investor, or at least allow them some expectation of honesty. By contrast the crypto world is a mix of honesty and dishonesty, and its hard right now to tell one from the other. The various implosions over the last year or so, some clearly dishonest, does the industry as a whole no favours. I say this as an outsider looking in.
  - herodoturtle 4y ago
    Thanks for taking the time to share this. I'm not an expert on crypto, and found your comment particularly insightful.
- acdha 4y ago
  Remember that “market cap” doesn’t mean liquidity exists. The price of bitcoin has been kept up by a small number of large holders buying when it sags, but they’ll only do that to the extent that it’s profitable for them. It doesn’t mean that there’s $450B available when you’re trying to exit.
olalonde 4y ago
TL;DR: GBT has trouble maintaining its BTC peg because various SEC rules preventing the market from operating correctly. Some people and companies have tried to fix the peg but it's difficult with the 6 month lockup period and inability to redeem shares.
- Animats 4y ago
  No, they don't get to blame this on the SEC. As Morningstar points out, Grayscale has the power to make this right. It can redeem shares at NAV and simply return investors their cash or bitcoin. That is, if Grayscale really does care about crypto investors. Grayscale offered a redemption program before 2016. However, the SEC issued a cease and desist order because the repurchases took place at the same time the trust was issuing new shares, in violation of Regulation M. The situation is different now. Grayscale stopped issuing new shares in March 2021. That leaves the door open for it to pursue a redemption program and bring GBTC closer inline with the price of bitcoin.[1] The key concept here is that if you're an issuer, you usually can't buy and sell your own issued stuff. (FTX did a lot of that. It didn't end well.) But Greyscale is done issuing. They can now redeem their own fund shares if they want. Or just liquidate the whole fund and return the assets to the holders. If they actually have all the assets. [1] https://amycastor.com/2022/04/19/welcome-to-grayscales-hotel-california/ https://amycastor.com/2022/04/19/welcome-to-grayscales-hotel...
  - vba616 4y ago
    >No, they don't get to blame this on the SEC. Then why are there ETFs anyway?
  - seanhunter 4y ago
    Indeed. It’s perfectly possible for an ETF to have a creation/redemption mechanism that doesn’t violate any SEC rules. For example, here’s state street’s explanation of how this works[1] [1] https://www.ssga.com/au/en_gb/institutional/etfs/resources/education/how-etfs-are-created-and-redeemed https://www.ssga.com/au/en_gb/institutional/etfs/resources/e...
    - 4y ago
Thorrez 4y ago
>Regardless of whether it contributed to their decision to disallow redemptions, it's an undeniable fact that not having a redemption mechanism was very lucrative for Grayscale until 2021 because it allowed the premium to remain in place. I don't understand that. It was trading at a premium. Why would anyone do a redemption if it's trading at a premium? I don't see how a lack of redemption ability would make it more likely to trade at a premium.
- vba616 4y ago
  I think if it were an ETF, which it isn't, then a "redemption" would mean someone could buy a large amount of bitcoin and trade it for a set amount of GBTC shares. I'm not sure why someone would frame "not having a redemption mechanism" as a choice by Greyscale to inflate the price - it's occurred to many people to make a crypto ETF for more accurate prices, and I vaguely thought that Greyscale in particular had been trying.
  - seanhunter 4y ago
    Creation/redemption is the fundamental mechanism that keeps ETF prices in line with their constituents. How it works for a normal ETF is there is a group of participating brokers (basically all the big banks usually) who have the right to create units by handing in the constituents of the basket and the corresponding right to redeem units for the constituents. This keeps the price within some bounds.
  - Thorrez 4y ago
    >someone could buy a large amount of bitcoin and trade it for a set amount of GBTC shares. They allowed that (with a 6 month delay) (until March 2021 when they stopped allowing it). That's basically what the entire article is about. Redemption is going in the opposite direction. And they didn't allow that (well, they did allow it, but stopped in 2014).
- stevedewald 4y ago
  It’s because someone could short (borrow) GBTC and redeem it for BTC for an immediate profit. The premium would disappear near instantaneously as short sellers captured the spread.
nullc 4y ago
Doesn't touch some of the most interesting points-- for example, Genesis was accepting GBTC shares as collateral to loan parties like 3AC more money to conduct more of the GBTC arb trade and for their collateral calculations they used (after switching to it mid-stream) the underlying value of GBTC's bitcoin rather than GBTC's market price guaranteeing that they would become massively under collateralized as the GBTC discount increased. Also doesn't mention that Gemini was marketing the 'earn' program using deceptive marketing that compared it to a savings account. It also seems to imply that most of the earn money was going into the GBTC arb, but really earn's promotion had scaled up after the arb was mostly dead. GBTC went into discount Feb 25th 2021 and has been since, It looks like I became aware of and started sending complaints about Earn sometime around November 2021. The first message in my email mentioning it, spam from Gemini, was on October 16th 2021: "Did you know you could be earning up to 7.4% APY on your crypto with Gemini Earn?". By that point GBTC was trading at a substantial (>15%) discount, so the arb was dead. Edit: initial announcement of Earn was https://www.prnewswire.com/news-releases/gemini-launches-gemini-earn-a-new-way-to-earn-interest-on-crypto-assets-301219887.html https://www.prnewswire.com/news-releases/gemini-launches-gem... Feb 2nd 2021, so I think it's unlikely that more than a trivial amount of the earn funds went into the GBTC arb. AFAICT earn money was going into (companies that gambled on) "defi" ponzi schemes, it's just that genesis really got screwed at a massive scale because of the GBTC loans and connected defaults.
- jcpham2 4y ago
  It is insane to me to see what are supposed to be legitimate, reliable, regulated businesses doing the same ponzi crypto interest shit that we learned on IRC this stuff doesn’t work a long time ago. The yield curves just don’t math Greg sir
  - nullc 4y ago
    Yeah, "what if Pirate Bank but BIGGER??". ::facepalm::
    - jcpham2 4y ago
      You get it, which makes me feel slightly less crazy.
WinstonSmith84 4y ago
I didn't see this mentioned but GBTC is akin to option trading, buying calls or buying puts (not selling them) with a six months expiry. The underlying instrument being BTC. It's a little more complex as outlined in the article, because GBTC has an added value, use(d) to provide institutional investor a gateway to crypto but it's still pretty much option trading in essence. Interestingly, when the premium became discount in Q1 2021, it was roughly 6 months later that BTC was at its ATH. In hindsight, this was one of the best signal available.
jcpham2 4y ago
It amazes me that smart people are still trying to earn interest on crypto deposits and failing due to greed. The network or the protocol can reliably pay interest. A company investing all the money and just betting on time value of money x time and calling it a business plan in crypto land is not a plan. You will lose every time. There’s no business plan to generate the interest payments reliably over time on most of these crypto lending programs - if the yield curve doesn’t flatten over time welcome to someone’s Ponzi scheme.
xorcist 4y ago
That's a really long article that just describes how financial arbitrage works. There are some things that decidedly look suspect around the Gemini/Genesis arrangement but GBTC isn't it. Of course an arbitrage doesn't last forever in a working market. People speculate against it, because there is money to be made. That's how the free market is supposed to work.
thy77 4y ago
I believe the word is ARBITRAGE

100 points by belltaco 4y ago

The article gives a good overview but is a bit on a sensationalist side with the presentation. The way I understand the situation (and I am not a expert, would love to be corrected): 1. GBTC was set up to allow people, who did not want to set up a cold storage, exchange or similar crypto mechanisms to buy a BTC proxy by buying shares of GBTC, which would buy the corresponding amount of Bitcoin. It was convenient, other options were difficult, crypto was hot, so GBTC traded, on a secondary market, with a premium to the underlying BTC it held. It also charged noticeable fees (which also allowed the company to operate without FTX style financing). 2. Where there is a price mismatch, there is arbitration. Sophisticated teams did leveraged arbitration on BTC vs GBTC and got a lot of money out of thin air. But all schemas like this work until they do not. At some point, GBTC premium on the secondary market turned into discount and people doing arbitration lost lots of money. I cannot shed too many tears for them: investment is risky and those were very sophisticated investors who had to know that arbitrage sometimes flips. Win some, lose some. 3. All that does not mean that people who invested in GBTC (bought shares through their traditional brokerages) got swindled, FTX style. GBTC still trades on secondary market. Any broker would be happy to let you buy or sell it. Like any closed-end mutual fund, its price may be higher or lower than underlying, which adds a little extra volatility (but nothing compared to the volatility of the underlying Bitcoin). But folks who decided they do not want GBTC can sell anytime and get dollars back. 4. It is useful to keep timeline in mind. If there is any whiff of the exchange or trader insolvency, people will pull the money in the matter of days; more likely hours and minutes. GBTC went from premium to discount about 1.5 years ago. If I wanted BTC today I would not buy GBTC; it is, says me, not the best option. However, I do not think it is going to collapse due to a fraudulent activity or creative financing. My 2c.

thaumasiotes 4y ago
> GBTC went from premium to discount about 1.5 years ago. If I wanted BTC today I would not buy GBTC; it is, says me, not the best option. The discount doesn't matter so much to that. If the discount rate stays constant, then GBTC is an equally good investment as any other exposure to bitcoin - when BTC rises 50%, GBTC will also rise 50%.
- dragontamer 4y ago
  > If the discount rate stays constant However, the discount rate is not constant. It was a premium a year ago (+10% ish), and now it is a discount (-50%). GBTC goes up and down based off of rumors of Gemini bankruptcy. Genesis will skyrocket if the bankruptcy rumors turn out false. Otherwise, GBTC may further collapse.
vgatherps 4y ago
If it can flip, it’s not really an arbitrage, but a bet that you’ll be able to exit the trade before it does flip or borrow costs kill you.
- vba616 4y ago
  If it's a permanent profit source, then it can't be an arbitrage either, can it? If two things are theoretically supposed to be the same, and they never converge, then the claim that they are the same seems dubious.
  - freeone3000 4y ago
    They're not the same. GBTC traded at a premium because custodianship of bitcoin is a service which could provide value. Currently the consensus view is that this value is negative -- maybe people don't trust GBTC in particular, maybe people don't want to trade a BTC derivative on regulated markets, maybe custodianship isn't worth as much as they're charging after all. But it's not exactly the same product, the same as a cash settled silver futures contract and holding silver in your basement are not the same product.
    - vba616 4y ago
      It's obvious it's not exactly the same product. The definition of arbitrage is what's not mutually understood. Like the "is Pluto a planet" argument. Say that your position is that only arbitraging between GBTC and GBTC on different exchanges is really arbitrage. Well, what if that doesn't converge? There has to be a difference in the first place, and some uncertainty. So if "exactly the same product" doesn't converge, then you can say that it isn't exactly the same after all. Which means that the definition of "same", however you choose, must be a bit arbitrary. Definitions are arbitrary, but I think there are objectively bad definitions, which are so flexible that they can include or exclude everything or that definitely do include or exclude everything.
      - vgatherps 4y ago
csomar 4y ago
> Sophisticated teams did leveraged arbitration on BTC vs GBTC and got a lot of money out of thin air. But all schemas like this work until they do not. At some point, GBTC premium on the secondary market turned into discount and people doing arbitration lost lots of money. This part doesn't make sense and makes me think the article is just random blurb. If you shorted GBTC and bought BTC during the premium and held until this point: You'll be profitable to your neck. Actually, you'll drown in profit. Not only you collected the premium but also now you get to collect the discount. Of course, someone might have mismanaged the trade. That's trading: It's not about "predicting" the outcome, it's more about managing the money flow. But the trade was profitable. It still is. The arbitrage is there if you are patient.

social_quotient 4y ago

Kinda lost me at the first excerpt “A lucrative arbitrage opportunity formed the foundation of much of the cryptocurrency industry. When it turned bad, it brought the whole house of cards down with it.” Total btc market cap still 450bn and total crypto market cap still 1 trillion. And it would be really myopic to say financial arb formed the foundations of “much” of the crypto industry.

bruce511 4y ago
I am not that into crypto, so forgive me for being naive, but I think there's a distinction being made here between crypto the technology and crypto the industry. So Bitcoin is the tech. You mine it, buy it, sell it, spend it, whatever. The Bitcoin price is what it is, it goes up and down. The industry are the financial instruments - derivatives if you like - of the tech. So no longer nitcoin, but rather shares in a company holding Bitcoin. Or exchanges where you deposit your Bitcoin etc. Most of industry offers a service, providing things not easily done with your Bitcoin sitting in your wallet at home. For this service they take a fee. This is the arbitrage in question, and since pretty much all financial companies, not just crypto, leverage this "Access for a Fee" (AfaF) approach, in a sense arbitrage is the root of the "financial industry" (not just crypto) Not surprisingly riles and regulations happened to traditional finance companies. An effort has been made to protect the investor, or at least allow them some expectation of honesty. By contrast the crypto world is a mix of honesty and dishonesty, and its hard right now to tell one from the other. The various implosions over the last year or so, some clearly dishonest, does the industry as a whole no favours. I say this as an outsider looking in.
- herodoturtle 4y ago
  Thanks for taking the time to share this. I'm not an expert on crypto, and found your comment particularly insightful.
acdha 4y ago
Remember that “market cap” doesn’t mean liquidity exists. The price of bitcoin has been kept up by a small number of large holders buying when it sags, but they’ll only do that to the extent that it’s profitable for them. It doesn’t mean that there’s $450B available when you’re trying to exit.

olalonde 4y ago

TL;DR: GBT has trouble maintaining its BTC peg because various SEC rules preventing the market from operating correctly. Some people and companies have tried to fix the peg but it's difficult with the 6 month lockup period and inability to redeem shares.

Animats 4y ago
No, they don't get to blame this on the SEC. As Morningstar points out, Grayscale has the power to make this right. It can redeem shares at NAV and simply return investors their cash or bitcoin. That is, if Grayscale really does care about crypto investors. Grayscale offered a redemption program before 2016. However, the SEC issued a cease and desist order because the repurchases took place at the same time the trust was issuing new shares, in violation of Regulation M. The situation is different now. Grayscale stopped issuing new shares in March 2021. That leaves the door open for it to pursue a redemption program and bring GBTC closer inline with the price of bitcoin.[1] The key concept here is that if you're an issuer, you usually can't buy and sell your own issued stuff. (FTX did a lot of that. It didn't end well.) But Greyscale is done issuing. They can now redeem their own fund shares if they want. Or just liquidate the whole fund and return the assets to the holders. If they actually have all the assets. [1] https://amycastor.com/2022/04/19/welcome-to-grayscales-hotel-california/ https://amycastor.com/2022/04/19/welcome-to-grayscales-hotel...
- vba616 4y ago
  >No, they don't get to blame this on the SEC. Then why are there ETFs anyway?
- seanhunter 4y ago
  Indeed. It’s perfectly possible for an ETF to have a creation/redemption mechanism that doesn’t violate any SEC rules. For example, here’s state street’s explanation of how this works[1] [1] https://www.ssga.com/au/en_gb/institutional/etfs/resources/education/how-etfs-are-created-and-redeemed https://www.ssga.com/au/en_gb/institutional/etfs/resources/e...
  - 4y ago

Thorrez 4y ago

>Regardless of whether it contributed to their decision to disallow redemptions, it's an undeniable fact that not having a redemption mechanism was very lucrative for Grayscale until 2021 because it allowed the premium to remain in place. I don't understand that. It was trading at a premium. Why would anyone do a redemption if it's trading at a premium? I don't see how a lack of redemption ability would make it more likely to trade at a premium.

vba616 4y ago
I think if it were an ETF, which it isn't, then a "redemption" would mean someone could buy a large amount of bitcoin and trade it for a set amount of GBTC shares. I'm not sure why someone would frame "not having a redemption mechanism" as a choice by Greyscale to inflate the price - it's occurred to many people to make a crypto ETF for more accurate prices, and I vaguely thought that Greyscale in particular had been trying.
- seanhunter 4y ago
  Creation/redemption is the fundamental mechanism that keeps ETF prices in line with their constituents. How it works for a normal ETF is there is a group of participating brokers (basically all the big banks usually) who have the right to create units by handing in the constituents of the basket and the corresponding right to redeem units for the constituents. This keeps the price within some bounds.
- Thorrez 4y ago
  >someone could buy a large amount of bitcoin and trade it for a set amount of GBTC shares. They allowed that (with a 6 month delay) (until March 2021 when they stopped allowing it). That's basically what the entire article is about. Redemption is going in the opposite direction. And they didn't allow that (well, they did allow it, but stopped in 2014).
stevedewald 4y ago
It’s because someone could short (borrow) GBTC and redeem it for BTC for an immediate profit. The premium would disappear near instantaneously as short sellers captured the spread.

nullc 4y ago

Doesn't touch some of the most interesting points-- for example, Genesis was accepting GBTC shares as collateral to loan parties like 3AC more money to conduct more of the GBTC arb trade and for their collateral calculations they used (after switching to it mid-stream) the underlying value of GBTC's bitcoin rather than GBTC's market price guaranteeing that they would become massively under collateralized as the GBTC discount increased. Also doesn't mention that Gemini was marketing the 'earn' program using deceptive marketing that compared it to a savings account. It also seems to imply that most of the earn money was going into the GBTC arb, but really earn's promotion had scaled up after the arb was mostly dead. GBTC went into discount Feb 25th 2021 and has been since, It looks like I became aware of and started sending complaints about Earn sometime around November 2021. The first message in my email mentioning it, spam from Gemini, was on October 16th 2021: "Did you know you could be earning up to 7.4% APY on your crypto with Gemini Earn?". By that point GBTC was trading at a substantial (>15%) discount, so the arb was dead. Edit: initial announcement of Earn was https://www.prnewswire.com/news-releases/gemini-launches-gemini-earn-a-new-way-to-earn-interest-on-crypto-assets-301219887.html https://www.prnewswire.com/news-releases/gemini-launches-gem... Feb 2nd 2021, so I think it's unlikely that more than a trivial amount of the earn funds went into the GBTC arb. AFAICT earn money was going into (companies that gambled on) "defi" ponzi schemes, it's just that genesis really got screwed at a massive scale because of the GBTC loans and connected defaults.

jcpham2 4y ago
It is insane to me to see what are supposed to be legitimate, reliable, regulated businesses doing the same ponzi crypto interest shit that we learned on IRC this stuff doesn’t work a long time ago. The yield curves just don’t math Greg sir
- nullc 4y ago
  Yeah, "what if Pirate Bank but BIGGER??". ::facepalm::
  - jcpham2 4y ago
    You get it, which makes me feel slightly less crazy.

WinstonSmith84 4y ago

I didn't see this mentioned but GBTC is akin to option trading, buying calls or buying puts (not selling them) with a six months expiry. The underlying instrument being BTC. It's a little more complex as outlined in the article, because GBTC has an added value, use(d) to provide institutional investor a gateway to crypto but it's still pretty much option trading in essence. Interestingly, when the premium became discount in Q1 2021, it was roughly 6 months later that BTC was at its ATH. In hindsight, this was one of the best signal available.

jcpham2 4y ago

It amazes me that smart people are still trying to earn interest on crypto deposits and failing due to greed. The network or the protocol can reliably pay interest. A company investing all the money and just betting on time value of money x time and calling it a business plan in crypto land is not a plan. You will lose every time. There’s no business plan to generate the interest payments reliably over time on most of these crypto lending programs - if the yield curve doesn’t flatten over time welcome to someone’s Ponzi scheme.

xorcist 4y ago

That's a really long article that just describes how financial arbitrage works. There are some things that decidedly look suspect around the Gemini/Genesis arrangement but GBTC isn't it. Of course an arbitrage doesn't last forever in a working market. People speculate against it, because there is money to be made. That's how the free market is supposed to work.

thy77 4y ago

I believe the word is ARBITRAGE