Grayscale’s decision to withhold this proof of backup data could mean something for BTC

  • The latest Grayscale Bitcoin data shows another crash or poor performance
  • BTC drops below $16,000 for the first time in two years

The collapse of FTX was a wake-up call for exchanges and crypto companies to adopt more transparency. As a result, many have embraced the idea of ​​an evidentiary reserve. So it came as a surprise when Grayscale, one of the largest investment firms in the cryptocurrency space, revealed that it had no intention of going down this route.

Read bitcoins [BTC] Price forecast 2023-2024

Greyscale revealed that it will not release evidence of back-up information in a recent report. The latter addressed user inquiries about the status of their investments in the wake of recent market events. Greyscale disclosed that it has no intention of releasing proof of backup information for security reasons.

However, it noted that Coinbase Custody Trust Company, LLC has custody of all digital assets, including Bitcoin owned through Grayscale. In addition, the company indicated that it has laws that prevent the release of assets under its management in loan protocols.

risk of investor withdrawal

Proof of Reserve reveals whether the underlying protocol or company has sufficient assets to facilitate withdrawals. Grayscale’s announcement saw her walk a tightrope for refusing to provide proof of reserve. Such a move could fool investors, especially the institutional participants who make up the lion’s share of Grayscale’s clients.

Moreover, Bitcoin has already shown some price slippage in the last 48 hours. This indicates the return of selling pressure. It was trading at $16,220 at press time, after recovering slightly from its brief drop below the $16,000 level.

Source: TradingView

The price action confirmed the weak investor sentiment. However, if the same expectations prevail, we may see BTC fall into the oversold zone. In other words, there was a high probability that bitcoin spent some time below $16,000.

Existing exchange flows revealed that the amount of Bitcoin flowing into the exchanges was lower than the exchange flows. This confirmed that there may be higher selling pressure in the market currently.

Bitcoin exchange flows

Source: CryptoQuant

In addition to lower currency outflows, investors have executed significantly fewer leveraged positions. This was confirmed by the estimated debt-to-equity ratio, which recently fell to a four-week low. This result is expected due to the increased levels of risk associated with the prevailing market conditions.

Bitcoin leverage ratio

Source: CryptoQuant

How do bitcoin whales respond to this?

The whales’ response may help provide some clarity as to the state of the market. Addresses holding more than 1,000 BTC have sold out over the past four weeks, adding to the selling pressure. However, the same metrics showed some buildup on November 17th, after which we saw some uptick in titles.

Bitcoin addresses with over 1,000 BTC

Source: Glassnode

The same procedure witnessed some easing over the past two days. This indicates that the whales have been waiting for the market to provide more clarity on the direction.

Bitcoin’s price at press time was relatively low, which means that long-term holders are likely to avoid selling. The lower the price, the more difficult it is to keep going further as the discount becomes more attractive to investors. However, the current state of Grayscale could contribute to more research and development that could potentially dampen BTC price action.

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