The news that many crypto investors have been waiting for has finally arrived: the U.S. Securities and Exchange Commission (SEC) will not challenge the approval of the Grayscale Bitcoin Trust (GBTC) as the first bitcoin exchange-traded fund (ETF) in the country.
The GBTC is an investment product that allows investors to gain exposure to bitcoin without having to buy, store, or manage the cryptocurrency themselves. It was launched in 2013 by Grayscale Investments, a leading digital asset manager, and is currently the largest and most widely traded bitcoin trust in the world, with over $40 billion in assets under management.
The GBTC operates as a private placement that issues share to accredited investors, who then have to wait for a six-month lockup period before they can sell them on the secondary market. The shares often trade at a premium or discount to the net asset value (NAV) of the trust, depending on the supply and demand dynamics.
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This is a huge milestone for the crypto industry, as it opens the door for more institutional and retail investors to access the largest and most popular cryptocurrency in the world. ETFs are investment vehicles that track the performance of an underlying asset or index and can be traded on stock exchanges like any other security. They offer several advantages over buying and holding bitcoin directly, such as lower fees, higher liquidity, tax efficiency, and regulatory compliance.
The approval of the GBTC as an ETF means that the trust will be able to convert its existing shares into ETF shares, which will eliminate the lockup period and the NAV discrepancy. The ETF shares will also be available to all types of investors, regardless of their accreditation status, income, or net worth. This will increase the accessibility and attractiveness of bitcoin as an investment asset, and potentially boost its price and adoption.
The SEC’s decision to not appeal the court’s ruling that granted the GBTC’s ETF status is a clear sign that the regulator is becoming more open and favorable towards crypto innovation. The SEC has been notoriously cautious and skeptical about approving bitcoin ETFs in the past, citing concerns over market manipulation, fraud, custody, liquidity, and investor protection.
However, under the new leadership of Gary Gensler, a former MIT professor who taught courses on blockchain and digital currencies, the SEC seems to be taking a more balanced and nuanced approach to crypto regulation.
The GBTC’s ETF approval is also likely to pave the way for more bitcoin and crypto ETFs in the U.S., as well as other countries that follow the SEC’s lead. Several other companies, such as VanEck, Valkyrie, WisdomTree, and Bitwise, have filed applications for bitcoin ETFs with the SEC, and are hoping to get a green light soon.
Moreover, there are also proposals for ETFs that track other cryptocurrencies, such as Ethereum, Litecoin, polkadot, and Solana, which could further diversify and expand the crypto market. The ETF approval also marks the recognition and legitimization of bitcoin as a mainstream asset class by one of the most influential financial regulators in the world.
The bottom line is that the GBTC’s ETF approval is a historic and positive development for the crypto space, as it marks the recognition and legitimization of bitcoin as a mainstream asset class by one of the most influential financial regulators in the world. It also creates more opportunities and incentives for investors to participate in the crypto economy and could spur more innovation and growth in the sector. The future of crypto looks brighter than ever.
Real USD (USDR) stablecoin Depegs and Price Crashes by 50%
In a shocking turn of events, the Real USD (USDR) stablecoin, which claims to be backed 1:1 by US dollars in a bank account, has lost its peg and plummeted by 50% in value. The USDR token, which launched in July 2023, was supposed to provide a reliable and transparent alternative to other fiat-backed stablecoins, such as USDT and USDC.
However, on October 12, 2023, the USDR team announced that they had encountered “technical difficulties” with their bank partner and that they were unable to redeem USDR tokens for USD at the promised rate. The announcement triggered a massive sell-off of USDR tokens on various exchanges, causing the price to drop from $1 to $0.5 in a matter of hours. The USDR team has not provided any further updates or explanations since then, leaving many investors and users in the dark about the fate of their funds.
The USDR debacle is yet another reminder of the risks and challenges associated with fiat-backed stablecoins. Unlike decentralized stablecoins, such as DAI or UST, which are backed by crypto assets and governed by smart contracts, fiat-backed stablecoins rely on centralized entities and intermediaries to maintain their peg and solvency.
These entities and intermediaries are subject to regulatory scrutiny, operational failures, security breaches, fraud, and corruption, which can jeopardize the stability and trustworthiness of the stablecoins they issue. Moreover, fiat-backed stablecoins often lack transparency and auditability, making it hard for users to verify that the stablecoins are actually backed by sufficient reserves of fiat currency.
A shocking incident occurred on the decentralized exchange Uniswap, where a user lost all their money in a single transaction. The user, who goes by the name of CryptoDude, had swapped what had been $131,350 in USDR for $0 in USDC, effectively burning their entire balance.
How did this happen? According to CryptoDude, they were trying to swap USDR, a stablecoin pegged to the US dollar, for USDC, another stablecoin with the same value. They had entered the amount of USDR they wanted to swap and clicked on the “swap” button. However, they did not notice that the exchange rate was extremely unfavorable: 1 USDR was worth 0 USDC. This meant that they would receive nothing in return for their swap.
CryptoDude claims that they did not see any warning or confirmation message before the transaction was executed. They also say that they did not check the exchange rate or the transaction details before confirming. They only realized their mistake when they saw their balance drop to zero.
CryptoDude blames Uniswap for allowing such a transaction to go through without any safeguards or alerts. They also accuse Uniswap of manipulating the exchange rate to trick unsuspecting users. They have filed a complaint with the Uniswap team and demanded a full refund of their lost funds.
Uniswap, on the other hand, denies any responsibility for the incident. They say that CryptoDude was solely responsible for their own actions and that they should have checked the exchange rate and the transaction details before confirming. They also say that Uniswap is a decentralized platform that does not control or influence the market prices of any tokens. They claim that the exchange rate of USDR and USDC was determined by supply and demand and that there was no manipulation involved.
Uniswap also points out that CryptoDude could have avoided the loss if they had used a limit order instead of a market order. A limit order allows users to set a maximum or minimum price for their swap, which prevents them from executing transactions at unfavorable rates. A market order, on the other hand, executes transactions at the current market price, regardless of how high or low it is.
Uniswap says that they have no obligation to refund CryptoDude and that they have no way of reversing the transaction anyway. They advise CryptoDude to be more careful and diligent in the future and to use limit orders whenever possible.
The USDR case also highlights the importance of due diligence and research before investing or using any stablecoin. Users should not blindly trust the claims and promises of stablecoin issuers, but rather seek evidence and proof of their legitimacy and reliability.
Users should also diversify their exposure to different types of stablecoins and be prepared for possible scenarios of depegging or insolvency. Stablecoins are a valuable and innovative tool for the crypto ecosystem, but they are not without risks and pitfalls.