Proof-of-Reserve, first published by Binance was believed to be the one basis on which the financial stability of the exchanges could have been ascertained. Meanwhile, some of the exchanges including Binance, Crypto.com, Okex, Kucoin, Bitfiniex, etc have displayed their PoR, Grayscale refused to do so.
Is Proof-of-Reserve Important? If Yes, Why Grayscale is Refusing to Show?
A Proof-of-Reserve is an audit done by a third party to ensure that it has the assets on its balance sheet and balances, they claim. In short, it is a snapshot of the reserves of the exchanges backed by cryptographic proof. Meanwhile, concerns about faking the liabilities emerge, no matter how reliable PoR are. Hence, many experts believe PoR alone cannot solely be relied upon.
Hence, Grayscale recently refused to display its PoR, due to security reasons.
All the digital assets under Grayscale are stored under the custody of Coinbase Custody Trust Company, LLC. As mentioned by the asset management company, Coinbase performs on-chain validation very frequently. Hence, it made it clear that the company will not display the on-chain information publicly through PoR or in any other means.
How Will This Impact the BTC Price?
Proof-of-reserve, in short, reveals whether the exchange can manage the withdrawals or not. While the Grayscale announcement created many speculations about the company’s position with respect to the underlying assets. Such a move may trigger the investors, especially the institutional investors and the whales, who have a huge share.
Meanwhile, the BTC price has displayed a negative impact, with a drop of more than 3% in the past 24 hours. It touched the lower crucial zone, just below $16,000, a couple of times but recovered slightly. This price action substantiated the dependency of investor sentiment. If the current trend continues, the selling pressure is expected to drag the price back below the daily lows of around $15,870.