Odd Lots The 'Widowmaker' Crypto Trade That Helped Blow Up an Industry
Jan 20, 2023
In a riveting discussion, Ram Ahulwalia, CEO of Lumida Wealth and crypto finance expert, unpacks the turbulent year in cryptocurrency. He dives into the pivotal role of the Grayscale Bitcoin Trust (GBTC) and its massive influence on market fragility. Exploring interconnections among major players like Genesis and BlockFi, he reveals how risky leveraged bets have backfired. The conversation also addresses regulatory challenges from the SEC and innovative strategies amidst diminishing yields, shedding light on a rapidly evolving landscape.
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Relationship Between Grayscale, Genesis, and DCG
- Grayscale and Genesis are subsidiaries of Digital Currency Group (DCG).
- Grayscale issues GBTC, while Genesis provides custody, trading, and financing for digital assets, including GBTC.
GBTC vs. ETF
- GBTC is similar to a closed-end fund, but isn't an ETF.
- It lacks the creation-redemption mechanism of ETFs, which keeps its price close to the underlying asset's value.
GBTC's Profitability
- GBTC was a profitable carry trade, generating billions for issuers and participants.
- Its premium ranged from 30% to 50% above Bitcoin's value for several years.